Angel Investing
Question
How much ownership of a business does a typical angel investor get in a start up company?Answer
It all depends upon the value of the company prior to the investment ("pre-money" value) and the money invested. Together, the pre-money value and the money invested are referred to as the "post-money" value. The formula for the investor's ownership is the Investment Amount/Post-Money Value.
Example: If the investor and the entrepreneur agreed through negotiation that the pre-money value was $1 million and the investor invested $500K, then the investor would end up with an ownership of 33.33% = $500,000/($1,000,000 + $500,000).
- November 14, 2011
- Investing
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