Whats the point of giving an angel investor equity if you agree on a multiple return buyout years later?

Question

lets say an angel investor invests $100,000 for 30% of a startup company. Before taking the investment the startup and investor agree on a buyout after 3 years for 3X the investment, so $300k. So what would be the point of offering the investor 30% of the company? Whether its 1% or 49% the agreement would still state after 3 years the investor would walk away with $300k. 

I guess the equity would be for insurance in case the startup cant afford the buyout? 

Do startups generally pay 30% rev share or is is 30% only if the company is sold? 

Answer 1

The investor would be entitled to 30% of the net income or loss every year, besides the buyout.

• Login to reply the answersPost

Answer 2

It secures the investment. Without equity, it's a loan, not an investment.

• Login to reply the answersPost