Ask HN: Investing your $$ in your startup... | Hacker News Reader

Ask HN: Investing your $$$ in your startup...

5 pointsrunT1ME4 comments

So I'm thinking of launching soon, and wondering if it is legit business tactic (or just sort of shady) to invest in my own company. I'm assuming that I'd also eventually be looking for outside investments in the next year or so.

I have between ten and twenty thousand in the bank that I could use for the startup. I'd like to retain a bit more ownership since I'm using my own money than if I just went out and found an angel with my product.

If I do this, will it hurt my chances of finding additional investments at a later time, and is there something important I should know about doing this? Thanks in advance.

EDIT: I don't just mean giving myself money, I mean starting another company(runT1ME's Angel LLC) that would give me(RunT1ME's software corp) seed funding in exchange for a percentage. The reason is so even if my shares as a founder get diluted, my shares from the other company do not...

Why don't you just book any capital injection as a loan to the company which needs to be paid back at nominal interest at some point in the future? Nothing shady about that.

If you increase the number of shares in the company (in order to give to the outside investment) all ownership (yours and the LLC) would be diluted.

But if you do invest your own money 1) Investors know that you have faith in what you are doing. (and be more likely to invest) 2) It will help raise the valuation of the company.

That being said, it doesn't make much since to invest through another company. That seems like it just complicates matters more. Investors are going to want a % of the company based on the valuation and the amount they are invested. It doesn't matter to them if you invested personally or threw a separate company.

You can't escape dilution by investing in a company. New investment dilutes both the common and the preferred. This is why investors ask for pro-rata rights, and have to put in their pro-rata in each new round, just to maintain their percentage ownership.

Generally speaking, if you try to invest in your own company you'll either blow a bunch of money on lawyering or you'll screw it up, resulting in a bigger bill down the road. Either way you'll be less far along than if you just used the money to put off taking investment, making progress and increasing your premoney valuation in whatever future round you do.

You're perhaps over-thinking your situation.

Putting your money where your mouth is will help outsiders take you seriously. Starting a business with your own money is the least shady thing you could possibly do.

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