How much is too much?

[Saj2301]

After over a year of perfecting a new online business (if perfection is possible) I am now in the process of having a database built and will launch in Spring 2006.

Having had interest from a few businessmen I now find myself in a bit of a dilemma. The money I had to invest in this venture has suddenly had to go to something non related and the main person who wishes to invest will have to provide a much larger portion of the setup & initial marketing costs. Which he hasn't a problem doing.

My dilemma is what sort of arrangement can I sort out with him to ensure he gets a good return on his money, but doesn't have a lifetime involvement in the company at his requested share of 50-70%.

Any case studies or much needed advise appreciated because I want this venture to allow me to finish my present job and concentrate solely on it. I don't want this to end up as just a way to earn a bit of pocket money.

Many thanks & I'll look forward to your replies.

SAJ

[OldJack]

You failed to mention what type of entity your company is organized and that might make a difference in what options you might have for the investor.

[Raz]

Saj2301,

You have to ask yourself how confident you are that your venture will succeed as planned. If you are certain that you are able to meet your goals, then it might be advantageous for you to obtain a loan from this investor as opposed to making him a shareholder of your business. Not only does financial leveraging have tax advantages, but the investor will only have claim to a fixed amount of your cash flows, regardless of how well (or poorly) your business does.