Assume company X has 2 online businesses abc.com and xyz.com. Can both these portals raise funds? How could this affect the parent company's stake?
Any examples you can share.
Hi,
That's a very good question and you have to be careful how you divide up the pie among investors. I think someone else responded to a similar question and that investors invest in the company and not in separate product or services which is true.
There is another avenue to get funded and that's through corporate collaborations. For example BigCo A invests in abc.com because it helps them strategically or their own in-house product development team can't get out of its own way or both. Corporate collaborations are a common business structure in the biotech industry where a "platform" biotech company works with Pharma A to cure Disease ABC and at the same time works with Pharma B to cure Disease XYZ, both using the same core platform technology. The original investors remain owners of the biotech. Pharma A and Pharma B get all sorts of rights to the discoveries for their specific diseases. Intellectual property, licensing, market rights are a big deal in this industry and the same might apply to your products and services.
Happy to discuss if you'd like to set-up a call.
All the best.
You can raise money for 2 online businesses with the same parent at the same time. The term sheet and closing documents need to be crystal clear regarding the ownership and rights. If the parent company pays compensation for any of the employees that work on the 2 online businesses, a management agreement may make sense to outline the percentage of time allocation.
I have seen this arrangement in many situations and the "if" - compensation - is one of many "ifs", you should think through when deciding if you should raise money with the existing legal entities or set up new one(s).
You do need to make certain the arrangement is transparent and clear to all or disputes can slow the progress of the business. Please feel free to schedule a call if you would like to discuss the arrangement you have in mind.
In your case, X will raise funds not abc.com and xyz.com as the portals are under the company X. You may raise funds from two investors, however, you need to:
1. Either, raise in two separate rounds
2. Or, club both the investors in same round
For understanding in detail, fee free to setup a call.
