Do you offer equity or a a fixed return to an investor? The answer, I believe, may demonstrate your faith in your business.

Option 1: An investor invests 1 million dollars in your business. You give the investor certain equity in your business. You are therefore splitting the risk with the investor.

Option 2: An investor invests 1 million dollars in your business.  You promise to pay 20% interest on the capital every year and after five years, pay back the double the capital, namely two million dollars. The risk is entirely yours.

If you do not pay up, the investor can sue you and take you to the cleaners.

If you wish to maximise your returns and are confident of success you may opt for Option 2.

If you wish to hedge your bets, you may choose Option 1.

If you wish your investor to mentor you, open doors and work hard to make your business a success, you may choose either of the two options, but more probably Option 1.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s