Welcome to Shark Tank
You have a great idea for a new business opportunity. You’ve run the numbers and are confident that with an initial investment of $500,000, you can turn a profit in three years and generate $150,000 in operating income per year. But you realize there are no guarantees. Further, you anticipate that there is at least a 50/50 chance the economy will enter a recession within the next two years.
You’ve approached several banks for a loan but have been turned down due to the lack of history in generating positive cash flow. Your only way forward is to secure an equity partner.
· What factors will be most important in reaching an agreement on the terms for a $500,000 equity investment that will be appealing to both you and to your equity partner(s)?
· How will demonstrate to potential investors that your business model is viable and worthy of the investment risk?
· Beyond capital infusion, what would you look for in identifying an equity partner?
· If your investor were also willing to fund a (partial) private loan, would you be interested in this and, if so, under what terms? Remember, your potential partner is a savvy investor who has other options, so you must consider “realistic” terms that provide an attractive risk/reward scenario and not just an arrangement that is lopsided in your favor.
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