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What are the steps I should take to evaluate a shareholder agreement with an accelerator?

I pitched (FindEarlyAdopters.com) to an accelerator in Amman-Jordan, they want to invest in the concept, this is the deal

Total Investment Amount: $50,000

Cash Investment: $33,000

In-Kind Services: $17,000

In return of 10% of equity

I want to understand the steps to negotiate the terms sheet, cap, equity, etc. I already read KISS of 500 startups, now it is the time to change the sheet to match this specific startup.

I already asked for their term sheet template to understand their process.

My questions are

1- How do I valuate this startup based on the milestones we have done (listed below)?

2- What are the things I should negotiate? What are the things I should not let go? What are the things I can neglect?

3- What are the common questions I should ask? What are the common pitfalls I should avoid?

Here what we have done so far:

1- We sold one client the service without a product.

2- We validated the problem, solution, market.

3- We delivered the service.

4- We understand the model & processes

Attached with this post,

the pitch deck (https://drive.google.com/file/d/0BzbCg9rVA-0YRzJXMms3RU1wVDg/view?usp=sharing)
financial model (https://drive.google.com/file/d/0BzbCg9rVA-0YZlQ4dXprYWZ0bkk/view?usp=sharing)
and a video pitch (https://www.youtube.com/watch?v=z_XN2eR2Keg)


Please ask any questions you have, I think this discussion is a great blog post to share with other entrepreneurs

3 Replies

Adam Pressman
1
0
Adam Pressman Advisor
I've helped a number of folks become millionaires. I'd like to do it a few more times.
Hi Mohammad,
The thing about "value" is you don't get to determine it. Value is an agreement between you and your market. From what you've shared, the accelerator thinks your company is worth about $500k. (a little less actually as the cost of those inkind services is no doubt less than 17k). The accelerator likely knows there's a 95% chance your venture is worth no more and maybe not even worth that. If that value doesn't sound like you want, don't offer equity. Equity owners are spouses to your venture, they are married to it for the long haul. Perhaps a loan as that amount is very realistic for a personally backed loan or, as you've gotten a small amount of revenue, build your funding yourself slowly but surely.

I'm happy to help consult with startups and can offer a wide variety of funding options that keep you in control of your venture, assure you get investors that can help you build success and wealth for you and not just them and preserve your options for later rounds of funding.
Mohammad Abu Musa
0
0
Mohammad Abu Musa Entrepreneur
Do you know why your customers leave your website?
Hi Adam,

Thanks for the tips, I think there is a huge difference in regulation from the Middle East and the US. in terms of incorporation, funding, investments, and agreements.

I do not thin regulations here in Dubai or Amman is near to what you witness in the US & in terms of funding it is very hard to convince capital to invest in technology companies (although this trend is changing)

I can send you the terms sheet I got, I would love to get your feedback on it

Rod Abbamonte
1
0
Rod Abbamonte Advisor
Co Founder at STARTREK / @startupHunter / @startupWay / @CoFounderFound / @GOcapital / @startupClub / @lastminute
The quality of accelerate and management program is more important them US$ 50k and for an accelerate and management program equity could be no more than 3.33%. If they want mor share is better offer an stock option with pre fixed value and time to confirm the option.
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