Ask HN: How To Avoid Getting Screwed By An Investor?

We are part of the 2nd generation at startup Chile program and that’s cool. The program is excellent and lots of doors are starting to open for our startup. Basically we do some kind of consulting for small and medium sized business in Latin-America that has been enough to achieve ramen profitability, rent office, buy equipment and been selected to participate in the program.

We have two months here in Santiago and a month ago we received an email from Startup Chile STAFF saying that some “small investors” where wanting to talk with us.

We did the 3 pitch, I think we did it great because they asked for a second meeting, we talked about details there and at the end of the meeting we scheduled a 3rd one for the next week.

This meeting was just yesterday and the investor said “YES, let’s start working”. We are a team of two guys, I do the “technical stuff” and my partner does the billing and taxes part... That’s great and is working but the problem is that I don’t know how to code and we want to build an application for our startup.

The investor is the CEO of a web development company in Santiago and he wants to partner with us. The deal is to have3- 5% of our company in exchange of building the application and some cash for us.

That’s a good deal.

I have thinking about this app for a while and by this point I have a lot of sketches about how the app should look and work. I just need someone to develop and the investor’s team can do this without a doubt.

He wants this sketches but I suppose is not a very good idea to show them without any signed contracts. He just gave us a NDA to sign but I don’t know what else we must do to avoid a story like this for us:

http://venturebeat.com/2012/02/27/a-classic-startup-horror-story-the-ma-bait-and-switch/2/

We have our next meeting on Thursday and I’m really in a hurry for advice about how to avoid “being screwed” by this guys… You know, I don’t want them to see the sketches, build the app and said “thanks for your cooperation guys, see you later”.

Any advice about what steps we should follow to avoid a “Horror story” Situation?.