Someone investing $1M for 10% might better off buy gold or a property.
It sounds good for me as a founder, but from investor point of view, this is pointless. Why taking a huge risk for 10%?
It sounds good for me as a founder, but from investor point of view, this is pointless. Why taking a huge risk for 10%?
I would easily consider a positive impact along with risk and returns when making an investment decision. Not everyone would, and not everyone should, but it is a part of the funding landscape.
Going from 10M to 20M is not a big stretch, and that would net me 1M already. More than gold appreciation I believe.
If the company goes to 20M in 10 years, that sounds great, but is only a 7% compound rate of growth. I can get that with much less risk by investing in the S&P 500. And don’t discount the risk. It is critical. A small business has a very large chance of 100% total loss. Compare that to the 500 index, which has a very small chance of a 50% loss, max.
To count for risk, I would look for a doubling (10M to 20M) in at least 2-3 years, min.
You also have to think about liquidity. If you want to cash out, who is going to buy your shares at the price you want? This might not be as easy as you might think. I can liquidate 500 index shares in seconds. It might take a year or more to find a buyer for your 10% at the price you want.