Give up controlling interest! “What?” you say. “Let someone else have control of my life’s work?” You’ve got to be kidding?
I understand this is a hard pill to swallow, but look at it from an investor’s point of view. Why should they put their hard earned money into coffers that you control? There is a reason they have that money. They’ve played the game and won more than they’ve lost (or they picked their parents well). Wise investors know that inventors can be a shifty lot. I’ve watched it happen. Just when they are about to hit a home run, the inventor decides to finish up another project first, redesign for the umpteenth time, or spend the investor’s money on a “research trip.” The investor without controlling interest stands there while their money pours down the drain, and there is nothing they can do.
Sometimes this can be resolved by bringing in a mutually agreed upon third party who is given two shares to participate in the decision making process should there be a disagreement. With 49% ownership neither party can move without the blessing of either their partner or the 2% shareholder.
Once your invention is thriving there are all sorts of buy-back plans, stock options, and other vehicles that will allow you to gain back controlling interest. Until that time your controlling investor may be your best friend. They are providing the capital you need and they are keeping you in line. If you’ve picked your investor right they know what they are doing, they want you to win, and they can bring business savvy to the venture that the typical inventor often lacks. It’s a good deal for you!
If you insist on maintaining control 90% of your investors are going to walk out the door – and do you really want the remaining 10% on your team?.