How do I structure the acquisition of a company in a way that satisfies both the lender and the seller?

If you want information that matters in "Creative Financing Techniques" find a person with the experience/insight. Most of what is in books is dated. Many of the more creative methods are a function of current tax code and market factors (like QE).

1. Before you dive into building out marketplace software you might find it easier to quickly test your MVP using a SaaS product like https://near-me.com/. I am NOT affiliated with them. But in a previous startup explored the marketplace concept. Spend 12K for a year on a SaaS product then spending so much more doing it from the ground up. If you gain momentum then start to build out your own platform. 2. Technical Co-founder is the person who will help bring your idea to life so enough skin in the game to keep them motivated and keep him/her hungry. 3. Remember 100% of 0 is 0. So if the CTO wants 20%-25%. Does it really matter at this point? No it doesn't. 4. Make sure you understand how to tackle the marketplace problem of the chicken and egg. You have supply on one side and demand on the other. What comes first? You should think through that as well.

Absolutely. I would focus as much as possible at raising the least amount of money possible while still optimizing your businesses ability to execute on its strategy. Money isn't free, the cost is the equity, interest, etc.

"Based on the success we are able to achieve" suggests, to me, you are looking at a price that will be tagged to an earn out provision. In other words, the price of the deal will be contingent on you achieving specific revenue targets in the future. If I'm reading this wrong, please correct me because it's an important piece of information. Early stage startup typically suggests a focus on revenue growth with minimal focus on earnings. The most valuable acquisitions will be those that have growth in the top quartile of the industry along with an EBITDA that is also in the top quartile. Companies with these will have the highest multiples. Revenue multiples are also a function of the industry and the general character of the market. Currently, the IPO markets are doing pretty well and the overall M&A market appears to be pretty solid making multiples equally solid. In terms of industry, the media publishing industry has moderate to slow growth depending on the segment. I'm assuming there is a social or online component to your startup which would suggest that it would be part of the new growth side of the market. Generally speaking, market growth averages are at about 8% for larger companies suggesting that new entrants should be able to sustain low to mid double digit growth over a longer horizon. "Growth rates", i.e. percentages, can be meaningless for very small companies. For instance, a company that grows from $25,000 to $250,000 in a year has a massive growth rate..... but the value may be very low due to lack of track record and overall profitability. As such, it can be very hard to estimate multiples. That said, if I were putting forth a hypothetical, it would be something like the following: Assuming: The company has over $1M in revenue and is growing at an average of 12 - 15% per year. Assuming: The company is profitable, but barely, say something in the 10% EBITDA range. Assuming: The company is a service company with few assets but is not subject to significant brain drain (key people leaving would result in devaluing the company). If any of the above are wrong, it can change things significantly. Revenue multiples might be in the 0.7 - 1.15x revenue on forward looking and .9 - 1.25 on a trailing level. EBITDA Multiples could be in the 8 - 10 times on a forward looking and 10 - 12 times on a trailing level. Take it with a grain of salt because there are a lot of factors you don't mention and more information is important to make a meaningful diagnosis.

What you're asking is very complex and to me 2% to 4% seems like a terrible ROI. There is a lot of information that needs to be provided to determine how to structure the deal and if it's even a good deal. Are you getting equity (a part of the ownership of the company) for your investment? If yes, how much (%)? Is the company valuation realistic? Is the company established and having sales or is it just starting out? Simple example: If you're investing 250k $ and the company has a realistic pre-money (before your money is invested in it) valuation of 1 Million $, you should be getting 25% in terms of equity. Of course things aren't that simple in reality but it's a good rule of thumb. - If I was to go ahead, how should the business be structured? This is hard to answer without more information. In general you should seek to have both equity and decision making power if you're investing into a business, if you want to be an equal partner you need both equal equity and power. Especially if it's in an early stage or if you're investing a significant amount of money. Which to me seems to be the case. How you'll specifically structure the business depends on the area in which the business operates in ex. software, manufacturing, sales, consulting etc. - What are the steps I can take to protect my investment? A lot of research and consulting into how these kinds of investments are usually done. You should obviously have a specific contract drafted by a lawyer as well which denotes the terms of investment. - How should any potential net income be shared if the proposer does not invest a single penny? Depends on what else is the proposer bringing to the table. Maybe other resources, machines for manufacturing, their network, blood sweat and tears, or whatever has a determinable value. Of course you need to figure out if what they're bringing to the table is of equal or more value to the money you're bringing in. - What are the pitfalls of such an arrangement? Also depends on the details. Some are: -> Giving the partner all the decision making power, "Trust is a terrible criteria for investment" -> There's always the risk of the company failing of course. -> If you don't draft specific contracts on what you're getting for your investment chances are you'll be getting very little I would suggest reading up/researching on investing into businesses (or start-ups), there are established procedures and contracts that are often used when investing.