You founded a start-up less than 2 years ago that has yet to create revenue. You have received a patent and have a working prototype. A manufacturer is set to start production but you will need capital to pay in advance. The initial $200,000 you invested has been spent. You own 100% of the 1,000,000 shares issued. It is time to go to the Tech Coast Angels and see if you can get some additional capital.
Your team met with the Tech Coast Angels in San Diego, Orange County and LA. Each group had a few interested individuals and you now have offers from each location. Note that the offers are independent and cannot be combined.
San Diego offers $250,000 for 25% of the firm
Orange County offers $400,000 for 1,000,000 new shares
Los Angeles offers $600,000 for 500,000 existing shares
For each offering, evaluate the following:
- Pre-money valuation
- Post-money valuation
- Yours and the investors % ownership after the transaction
- Number of shares outstanding before and after
- Post money value per share
- Which is the best deal and why?