What is a Fair Percentage For An Investor? 

Neda Ali (Editor)

16th Mar'21
What is a Fair Percentage For An Investor?  | OpenGrowth

For any investor, money matters. When they lend you money to run your business, one thing they need is good returns. But, giving an investor good money does not mean you give them a good chunk of your profits, and you are left with peanuts. You have to calculate how much percentage of your profit goes back to the investor in the form of returns.  

There must be a genuine pledge to a solid leave strategy in three to five years. On the off chance that you don't care for these standards, revamp your business plan to require less Investment. 


What percentage should you give an investor?

Investors need to have enough clout to ensure you don't choose later to prefer not to sell the organization. That doesn't imply that each investor will need more than 50 percent, yet the person will quite often need to see that the outside investors, when their property is consolidated, hold more than 50 percent. They don't bring in cash when you do. They possibly bring in cash when you sell. 

So, make the best of your bargain only after you are have completed a thorough research on the investor and the financials of your own organization. YOu also need to have five year plan ready to project the future prospects on which the investor will bank on for a good amount of investment in your venture. 

Fair percentage for an investor


How to calculate the returns? 

When the investor asks for a stake in your company while negotiating, you need to take care of the following things: 


Take a note of your cash flow 

First, you need to have an idea as to how much cash flow your company’s pockets have. Second, the amount the financer is offering you. On the basis of these two, you can decide on whether you give your investors money or give them a stake. Remember, giving them a higher percentage of stake in your organization, might turn out to be a hurdle for you. 

However, make sure not to give equity to a person with whom you do not want to have a long-term business relationship. Those small percentages that startups offer their investors will make you go crazy. Those shares are important as when you grow big, these shares will be needed for employees. 


Be tough on calculations 

You need to do the maths of equity and valuation correctly. Your negotiation with the investors all depends on how much you think your organization is worth. So, if you agree to a 10 percent equity for $250,000, you are saying that your organization is worth $2.5 million. Also, with more equity percent an investor has in your company, the more they will bug you for money if things do not go the right way for you. 


What rate of return do investors expect?

Since most investors get their cash once again from the offer of an organization to another business, investors contemplate how huge an organization's valuation can develop after some time. The greater the stake in a company, the better. 

All in all, holy messenger investors hope to get their cash back within 5 to 7 years with an annualized inner rate of return ("IRR") of 20% to 40% of stake in a company. Investment reserves take a stab at the higher finish of this range or more. 


Therefore, you have to first evaluate your own startup and then approach any investor for finances. A clear roadmap pf investment with a clear headed investor can only make your business work. Do not give away too manu shares for it is your baby you have raised all these months. An outsider intruding this space will affect your working and vision. 


We, at OpenGrowth, are continually looking for trending startups in the ecosystem. If you want to know any further information about the startup ecosystem or have any mind-boggling ideas, do refer to the other blogs at OpenGrowth. If you have any suggestions, do let us know in the comment section below. 


The Editorial Team at OpenGrowth is working to provide you with the perfect place to know everything about startups. Feel free to connect to us.


Blank User| OpenGrowth


5th Apr'24 01:45:21 AM

Great knowledge! Please suggest me more information titles related to Investors share percentage & Exact advantage & disadvantages of offering shares to investors

Blank User| OpenGrowth


24th Dec'23 12:04:01 PM

HOW I RECOVERED MY LOST CRYPTO I lost all my crypto to a fake investment scam to someone I met online. I started searching for help legally to recover my funds, and I came across a lot of Testimonies about HACKER STEVE. I contacted him, providing the necessary information and it took him and his team of experts about 36 hours to locate and help recover my stolen funds. I am so relieved and the best part was, the scammer was located and arrested by local authorities in his region. I hope this helps as many out there who are victims. I strongly recommend Steve professional services for assistance with swift and efficient recovery (Crypto, Credit card, Forex, NFT, etc) on Gmail: Hackersteve911@gmail.com

Blank User| OpenGrowth


23rd Aug'23 10:20:34 AM

Very insightful update, i will also say this here. Investment is one of the best ways to achieve financial freedom. For a beginner there are so many challenges you face. It's hard to know how to get started. Trading on the Cryptocurrency market has really been a life changer for me. I almost gave up on crypto at some point not until saw a recommendation on Elon musk successfully success story and I got a proficient trader Mr Bernie Doran , he gave me all the information required to succeed in trading. I made more profit than I could ever imagine. I'm not here to converse much but to share my testimony; I have made total returns of 1.6BTC from an investment of just 0.6BTC. Thanks to Mr Bernie I'm really grateful,I have been able to make a great returns trading with his signals and strategies .I urge anyone interested in Cryptocurrency to take bold step in investing in the Bitcoin market, you can reach him on WhatsApp : +1(424) 285-0682 or his Gmail : BERNIEDORANSIGNALS@GMAIL.COM, bitcoin is taking over the world.

Blank User| OpenGrowth


9th Aug'23 01:59:43 PM

My partner was so smooth at hiding his infidelity so I had no proof for months, I was referred to some Private investigator firm and decided to give them a try.. the result was incredible because all my cheating partner’s text messages, WhatsApp, Facebook/Instagram and even phone conversations was wired directly to my cellphone. if your partner is an expert at hiding his or her cheating adventures contact "Garry Speed Hack", they're fast and reliable them on +1 ( 626 ) 557-1615 Email ethegrossl09@gmail.com Website https://wzardgarryspeedhac.wixsite.com/my-site-1