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Key advice when seeking funding

Do whatever you can do to preserve the percentage of equity (i.e. shares) that you own in your company. 

Once you begin seeking outside finance, all investors will want an “exit” to occur within a stated period of time (generally three to five years).  At that point, they will urge you to sell the company and each percentage of equity that you retain can ultimately be worth millions of pounds. 

A good example is NET-A-PORTER.com for example which was a shelf company that was worth virtually nothing that was purchased after six or so years at a valuation of more than £600 million.  Thus, each percent of equity was thus worth £6 million.

So – do whatever you can to hang on to your equity and try to avoid giving it away cheaply and if you do, see if you can insert a right to have it back if the funders reach an acceptable level of return on their business.

For more information about Olswang go to http://www.olswang.com/main.asp?sid=193

Readers' comments (1)

  • each percent of equity would be worth £6m.....

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