Innovator vs Financier

There are plenty of situations where a visionary might come up with an amazing concept but lack the funds to bring it to life. That's where investors step in, believing in that idea and providing the necessary cash to support the venture until it starts making money, similar to what happened with Bill Gates and Microsoft. Once the business starts turning a profit, how should that profit be split? What’s a fair division between the initiator and the investors? 50/50, 60/40, 30/70, or maybe 70/30?

Do you mean the visionary should have 70% while the investor should have 30%? Investor should have 70% while visionary should have 30% is what should happen. Or they can even make it 75:25 or 80:20. Who also has the business is the investor and not the visionary. Without money or investor, the visionary is nothing.

It's not that simple. It depends on how the negotiation goes. If you're going to give the investor a part ownership of your company, then you have to negotiate to know the percentage of your company he has. Those kinds of investors are called Angel investors . Some investors just take profit when the business starts, while some take an equity stake in the business. It all depends on the manner of the funding, the stage of the funding, and the potential os the business. Venture capitalists usually take 10% to 30%  of the business. It may be more, but it depends on a lot of things, and they can be negotiated.

That's pretty naive simplification. Vision is rarely enough for investing, other then maybe in early ICOs. Microsoft and Apple were making products already before investors came. Same goes with many others. It's about fast scaling up, so that competition can't bury your idea. When it comes to shares, that's based on cases individually, as it's not just about the "idea", and more about costs, experience needed on different fields and interest that already exists for the product.

Remember that an investor is coming with the finance in the business which is very important to note because an investor can carry his or her money easily to another visionary mind, if not the same kind of vision/business but another/business or even same kind of business because he has the power/finance to sort, search and see who has the kind of business idea he/she wants to invest in. The investor is also probably coming with experience and to bear losses. So it also depends on the agreement had on the terms to invest and run the business . Like in partnership business which is smaller kind of business venture after sole proprietorship, if an investor is also active in running the business then he should have a higher percentage gain or losses in the partnership. In public limited company or public company, the risk and profit are determined by how much financial involvement an entity has through shares. Like take the instance of FedEx on the chart below. https://www.tikr.com/blog/who-owns-fedex-top-shareholders-and-recent-insider-trades

The percentage should be derived from there initial agreement before commencing. When someone brings the knowledge and the second person brought the resources it becomes a partnership business because the both are running the business together they are almost the same important because without the knowledge there is no way any amount invested will bring profits and the same goes to the person without funds so actually what they would do is to reach an agreement of sharing formula that would be legally bind in case there come a time when any of them will start demanding to earn higher than another the court will rule it base on the agreement so actually the percentage can take any form, perhaps even more than or lower than the ones you said.

It depends on what percentage they agreed on, but the normal standard should be that the investor has to take more from it than the visionary, considering the dream would have never taken flight without the financial backing of the investor. Imagine a scenario where it failed; it would have been the investor who would have risked his capital, facing a chance of loss as well, which is the greater risk. If a visionary demands more or an equal percentage with the investor, that is a greedy visionary to me.

The debate on this about who's to get the bigger percentage in profit of the business is in this question of "who is taking the biggest risk"?, between the investor who's pulling out his funds for an idea he has only believe on it to have potential to grow without a guarantee, and there is you, the one with just a brilliant idea but bearing no financial risk. So in a simple answer, the biggest risk bearer as given would have to share in the biggest percentage, a percentage I wish not to be specific on but depending on the two individuals agreement.

I believe there’s no universal right percentage since everything is case to case basis. There’s time that visionary badly need money to continue the project while there’s no assurance that the project will be successful. Investors is risking huge amount of money on uncertainty so they have the right to share higher percentage depending on the risk involved. The situation can be reversed which visionary just need partial investment since he has high confidence on his product that will be successful.

In business the profit sharing formula should depend on the agreed amount, i mean the amount that was agreed between the two partners being the visionary and the investors, that's why in any business things are not supposed to be done blindly to avoid unnecessary conflict, in as much as I think you're right by saying that the owner of the business is the investors, when it comes to how to share the profit made, the agreement says it all and I believe that no matyer what, the sharing formula should favour the business owner because all the risk was taken by him alone and if anything had eventually taken place, financier which is the investor would've been in loss so whichever way he will have to get the lion share which I feel is the best thing to be done.

That depends on the agreement of the investor and the owner himself. These people won't just do random calculations but they have everything set hindsight. In startups, they have the assessment and value based on how it's going and valued. If the investments will be in stocks, then the stocks will be the determining factor on how much the split is in profit. And let's just make it easier to understand, the bigger the investment, the bigger the risk and its potential reward.

Sharing of profit should come after the investor has recovered what he has spent on the business. It is assumed that the business has started making a profit when the initial capital has been recovered. The visionary would be under a special remuneration until the business starts making a profit. Anyway,  a 50/50 sharing formula is not bad because without the idea, the business wouldn't have existed. And without money, the business wouldn't have started.

Yeah that is the reality. Dreamers though, believe the idee is worth more-

To start with, in the real world setting, when investors knows that you don't have the financial strength to bring your idea to life, what they do is to completely buy or steal the idea from you if they know it's something that's really good. If they allow you to be involved in the business, the highest you can get won't be more that 30% because what really brings an idea to life is money. The only condition that can give you much gain from such a business relationship is when there's a formal document that states how much each person is to earn even before the commencement of the business. If there's none in place, then be ready assured that you don't have a single say in the business even if you claim to be the Brian behind it. There's a lot that money does in matter of bringing a business idea to life.

I think it is greed if the visionary of the investment or business chooses to take 30% of the profit from the investment because an investment is what it is because of the money used in starting it up. If the visionary only provided the idea of the investment or business, I think there is no reason to expect much from the investment. In a case like this, I think there should be an agreement, and the one behind the idea of the investment, if it becomes successful, should receive an amount to compensate the visionary. If it is an agreement to be paid for some years, it should be an amount that is fair and not one that is fixed out of greed.

It's crazy investor only invest their money and earn the highest compared to the human resources, is that what happen in your country? I see mostly investors earn as high as 50%, but usually they're only earn 10%-30% depends on big they invest. Visionary should be actually important, but as time goes, modifying/copying someone else ideas looks normal nowadays, which make ideas are getting worthless.

Indeed, if you talk about the narrative of two visionary and investor individuals, it is a strategy to develop an economy and fantastic benefits. Example: The toll road is created by a collaboration toll road between visionary and investor, where those who have designing long -term strategies, abilities, insights are united with those who have money, the final results of the economy are easily quoted. The point is: Every human being has advantages and disadvantages, it is certain, like Sampu Lidi if it is combined all the garbage can be broken, Imagine only one stick, as well as visionary and investors are two people who can create a fantastic economy, be it individually or in the country.

Obviously investor is far far more important in this. Because, while there might be a few visionary that actually does end up getting good results, the reality is that everyone in the whole world has an "idea", and if all ideas were funded, we would have bunch of failed bankrupted visionaries everywhere. It's the investor that has to make that difference so that they would know which one is a good idea and which one is a bad one. Visionary ends up being so much different, and that's the risky move that we are going to see from the investor, because investing into something will make it harder for everyone else. If they do a fine enough job, then they could probably do a great company together, but always need the investor money first.

Typically, the profit share is higher for investors because they bring capital. If the business doesn't go as planned, the investor automatically bears the risk. However it all comes back to the initial agreement; it's impossible to avoid negotiations before starting a business. So your question op, all boils down to the initial agreement between the visionary and the investor. The clearer the agreement at the outset the fewer problems there will be later.

No, it doesn't work like that. Investor doesn't only invest money but the investor has connections, is experienced with negotiations, knows how to run the business, knows how the business works, how to build it, expand and so on. That's why I expect their share to be much higher than the share of the visionary because as others said, being a visionary doesn't mean much if you don't have money, so, you either get a loan and take all the risks on yourself to get all the reward in the end or you don't risk, investor risks and you get a small share. That's how life works.