If I invest $75K in a startup company in exchange for a percentage

>>1842542
Dividends.

OP why are you investing $75k in a start up when you don't know what dividends are?

What makes you think this company will be successful?

>>1842548
It takes a long time for dividends to give a return on investment. A better strategy is to accept royalties for the first year before accepting dividends alone.

>>1842663
Please explain more.

I'm ignorant on how private equity works. Just thought OP didn't have sense.

I'd google but I don't want to sift through "4 easy steps to create a start up" for an hour.

>>1842542
>>1842548
>Dividends.
...Dividends? Really? You think a privately held start up is going to be paying their (probably minimal) investors a dividend?

I could be wrong, of course, but I think there is a much greater chance that *you* are wrong

OP, the way you profit from this deal is if you are investing in the next AAPL, MSFT, or GOOG(L)

Eventually, your 75k for, say, 10% of the company will be worth more than the 75k you initially invested

It is incredibly unlikely that your 75k to % ownership exchange will ever be worth more than 75k principal amount, but it is possible. The idea is that 5-10 years from now the company will actually become something, and you're helping them get there

Fuck the guy who said dividends. Jesus Christ, I swear there are like 3 people on /biz/ who actually know anything

>>1842663
With startups the dividends can actually be pretty high as a company grows from nothing to an established player. 75k is nothing compared to the value of many three year old businesses.

As usual the risks are equally as high. As startups often fail within the first few years. I wouldnt invest in a startup if they couldnt stay afloat and keep growing without my money. The best startups are the ones that just need money to accelerate the growth.

>>1842711
>What is VC
>What is Owner's DRAWING

Say the wrong word and some freshman finance major who reads slate jumps dowm your fucking throat.

>private funded unicorns like uber that don't intend to go public don't reward their investors

OP ignore this retard. You should get drawing rights in your contract. Google a limited partnership.

>>1842542
If the company has a patent and you're investing in the business as an independent investor, don't you think you're investing as a higher profit margin around a highly successful idea around a perfect business model?

>>1842663
I don't see how royalties could outweigh dividends unless they're stupid enough to pay a higher percentage than they can afford, in which case your shares will be worthless before long.

>>1842542
>how do I earn money without selling those shares?
You usually don't. A start-up is a very specific kind of company, not anything like normal businesses with fast steady growth and profits. They're usually looking for very fast growth and under these circumstances they will typically *not* distribute profits to the shareholders. Heck, most start-ups make massive losses for years because they grow and invest constantly.

Since other people have mentioned VC for start-ups - VC doesn't want to hold. They don't even care about making a business sustainable. Dividends is simply not on their agenda. They pretty much only care about the exit - selling their shares for massive profit, either when the company goes public or when you sell the start-up to an established corporation. So if people think you should model your approach after VC, 9 times out of 10 you wouldn't even care about dividends.

On the other hand - VC is risky by definition. If they invest in 10 start-ups, 7 outright fail, 1 becomes a sustainable small business (which is considered a failure from the perspective of VC), 1 takes off, but only after 10 years (which is also a failure) and 1 goes through the roof with a successful exit within 10 years yielding 20-100 times the initial investment. VC makes their money on roughly 1 out of 10 investments into start-ups.

>I know how to get them leads to grow their customer base.
So you want to be a Business Angel? See if you can focus on your work and network in return for equity instead of a monetary investment. Typically this is still a high-risk investment for very experienced businessmen. The fact that you ask on /biz/ doesn't really bode well to be honest. Can you trust the team? Can you trust the business model? Why should this start-up be the 1 out of 10 that doesn't fail? Can you stomach losing all your money? Are you in it for 5-10 years? Do you have an exit planned?