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How Not To Sell Equity Too Cheap, Too Soon

Posted on Thursday, Aug 18th 2011

By guest author Irina Patterson

At our 1M/1M roundtables, we often hear horror stories of entrepreneurs who have sold 25% of their company to investors in exchange for $15,000.

I always find Sramana jumping off her chair when she works with those entrepreneurs.

If you do not validate your business adequately in a bootstrapped mode, and go out to raise money early on, you will inevitably encounter such sharks.

Please, don’t go out and sell your equity too soon and too cheap.

In our 1M/1M program, we want to teach you how to avoid the sharks, and how to build enough value and enough valuation so that you can avert these disasters.

You cannot recover from them, because once you have sold that much equity, you have set in motion the process of losing control of your company.

This is also why we do not take any equity in companies that enroll at 1M/1M.

Many incubators do. Some charge 6% for $15,000, which is also quite expensive.

We prefer to let you preserve ownership and charge only a $1,000 annual membership fee with which we can educate and incubate you through the earliest stages of your venture, and help you work your way up to at least $2 million pre-money valuation.

So, before you sell any equity in your company, you would do well to join 1M/1M with $1,000. It will help you save large chunks of equity and, most important, preserve your full control.

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