The distribution of percentages in small projects

One of the most difficult questions being asked lately is likely due to the fact that things are relative in life. What applies to you does not necessarily apply to others.

Here, I will try to explain and simplify as much as possible in hopes of reaching a clear answer on this topic.

The important thing here is that you need to study the matter well and present an excellent pitch to the investor because it is very easy, and I mean very easy, for the investor to reject an investment idea immediately if the percentage is unsatisfactory or the opportunity is unclear.

We return again to the fact that 1% can be very satisfactory for an investor, while 50% may be unsatisfactory. It all depends on the details of the project, and as we mentioned, it is difficult to apply a general answer to all projects.

Here are some general guidelines:

• What is the size of the market you are operating in?

• What is the share you can acquire?

• What is the current status of the project? Do you have customers, or is it just an idea? If there are customers, this increases the value of your project.

• How much funding do you need at this stage? Don't ask for more than you need or less (study this carefully).

• What is the return on investment (ROI)? Investors usually want to take a risk with their money in exchange for getting it back plus a profit, which is called ROI. The better it is, the more you can negotiate appropriately.

• Is the business model profitable and feasible? This is an important point, especially in the idea stage.

• Have you tested the business model؟

• Have you created an MVP (Minimum Viable Product)?

• When will the project break even (payback period)?

• Who is your founding team? Be careful! Investors do not want to take a risk with a single founder.

• Be cautious about asking for an unreasonable share and calculate it well. For example, if you ask for 300,000 SAR and offer the investor 20%, this means your project is valued at 1.5 million SAR. Is this correct? You are the best judge—calculate it well.

• Be careful about incorrectly allocating the investment amount, such as asking for 300,000 SAR, 200,000 SAR for the project, and 100,000 SAR for yourself in exchange for a share... Most investors will avoid this.

• A piece of advice! Do not present your project for investment at the idea stage. If you must, test and validate the business model first. Ensure the founding team has executed the prototype with the lowest cost.

• Finally, after performing your calculations, focus on what will attract the investor and give them a good return in a reasonable time, and present it to them, keeping in mind future funding rounds!

Warning! The project may fail due to the inability to enter future investment rounds because of giving away high percentages early on. Be cautious! Leave a good share for the team in both the founding and growth stages.