New Accountant`s Input
JLove subscriber Posts: 2
edited November 2008 in Business Planning
My friend and I have built a software platform which will be the basis of a startup company that we are planning to launch January `09. We have spent time and a little money to build a 1.0 release.
As an initial contribution to the corporation (with potential investors in mind), we want to "contribute" the platform (with all rights) into the corporation. The question is:
1) Can we value the platform and use that "value" as our initial capital contribution instead of the real dollar cost of developing the platform? We only paid $5000 for a coder to code it in plus our "sweat" to complete it?
2) A potential investor is asking for the real money we put in but we are hesitant to giving him the real cost because he might based his valuation on this real cost. Should we say that the cost is irrelevant and what is important is the market value of the platform.
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you`ve got some great questions and this is the best time to make those decisions.
For openers, how you provide the platform to the company depends upon several factors. You may not just want to relinquish all control over it.
Also, negotiating valuations for very early stage businesses, can be challenging. While it`s common for an investor to ask "how much skin you have in the game" - it`s how they use that information that can be a "warning sign".
Send me a PM if you`d like to discuss the specifics of your situation.
los angeles business investors
run a few different scenarios (if / then / what if analysis) and include that in your business plan to the investor. you talked about market value - now come up with ways to demonstrate it.
good luck to you
There is a company called Equity Net that has some very good tools to help with valuations. They have a tool called the Enterprise Analyzer that is worth checking out. It may be worth doing a basic valuation prior to meeting with investors. www.equitynet.com