Serious inventor/investor contract question - need your insight!

[samo]

Scenario :

I come up with an invention and patent it.

I do my market research and find out that the invention has great potential and is not demographically biased in any way so it can be very successful.

I find an investor and he/she is investing $75,000 into my product in addition to my own investment of $35,000 for the initial advertising and manufacturing.

Now I need to write up a contract with my investor - what do I need to know or do? Are there any standard percentages between the inventor/investor relationship? Is 50/50 an appropriate profit split between the two? I know negotiation will be necessary but I have no clue as to what figures to even start with.

Please, any insight will be helpful!

Thanks!

-Samo

[the_ceo]

Unless your looking for a partnership you will want as high a percentage as possible. The investor may be putting alot in but your not sure how much of his time and involvement he will put towards your business. find out your predicted profit for next year and think do i really want to give away this much money?

[StealYourDreams]

This is one of those “it depends” questions with no specific answer. It depends on:
- What you can negotiate
- The upside potential
- Time to exit and the exit strategy
- Whether the investment is straight equity or debt and if there is any security agreement, i.e the pledge of certain or all assets.
- How many rounds of financing you will need?

There is no such thing as a standard agreement, everything is negotiable. I’d suggest that you contact SCORE and have them assist you with the percentages and perhaps come up with a cap table. Once you’ve determined the terms of the investment have an attorney draw up the term sheet. In your situation it may be very simple and well worth the money spent.

Also, as someone pointed out that you were looking for a partnership which is not necessarily the case. You can structure the deal any way you see fit. Keep in mind there are both passive and active investors. Which one you take will significantly affect not only the structure but everything else