What should be my share after a second round of investment?

Question

I am about to found a startup company, with a partner.

Say I have 50% of the business, after investing $25K and that my partner has done the same and has the same share.

Suppose we reach a point where we need additional 50K, but this time my partner invests all 50K, and I don't invest at all. What do you think should be my share? 33%? Is that fair to my partner given that in the second round he takes all the risk? If not, what could be a fair share?

Answer 1

If your company is currently worth $50,000 (you and you business partner invested half) and your partner invests another $50,000, your company will be worth $100,000. Hence, your partner should own 75%, and you should own %25.

Only if you and your partner agree that your business appreciated and is now worth $100,000 (that is, your investment doubled in value), only then should  your stake be 33% after you business partner invests another $50,000: After the investment, the company will be worth $150,000, you own $50,000 (your initial investment that doubled in value), and your partner owns the remainder.