How VCs or investors invest in businesses in terms of shares?

Question

Hi,

Say I have a business with 4 shareholders with share (ordinary) percentage of 50% : 30% : 10% : 10%, where I own 50% and the only full-time employee. If a VC or investor would like to invest $300,000, and a pre-money valuation of $0.5 mil, what's the most common deal they would take, as in,

-what will be the new share percentages?

-Would they ended up as majority share holder? What I understand is VCs would not own majority as they want to keep my motivation up to run the business and also they wouldn't know how to run our business

-If they decide to take lesser shares, wouldn't that requires them to invest a smaller sum, just to balance the whole percentage thing? The thing is we need a higher sum of investment to grow the company

-If we increase the company valuation, wouldn't that seems to far-fetch for them to invest in?

My ultimate question is, do I need to buy over my smaller shareholders' share (the 10% and 10%) to maintain majority?

Answer 1

The ultimate answer to all your questions above would be in : what is the turnover and profit of your business. That will give a price of your business and the price of the share of the company. Also the future prospects of your business determine the stock price. So if your stock price turns out to be good the the VC money would buy a minuscule portion of your stock.

If the business prospects of your co are good then it is a sound idea to buy out the other share holders.