The division of shares between the investor and the technology team: NPV as a basis for calculations?

Question

Business Informatics

Good time of the day!
Under a certain idea, a prototype was made, which showed good results. We found an investor, with whose staff we developed a specific business plan. One of the main indicators there is "Net present value" or "Net present value", in short - NPV.
It is proposed to divide the shares based on the contribution to this estimated amount.
If someone already has successful experience in negotiating and launching startups, please tell me, is this an objective assessment that can be used as a starting point in discussing shares in a future joint company? If not, what other alternatives can be offered?
Thanks in advance to everyone for the discussion and replies.
Clarification 1: - thanks to GM2marsfor a leading, clarifying question.
The situation is as follows: there is a contribution from our team, a prototype, which was estimated at the sum of X; there is an estimate of the required investment Y; is an estimate of the expected profit of the project NPV. It is possible to invest in several stages Y=Y1+Y2+...+Yn. As the project develops, the cost of our contribution to the code and the development of project X will grow, it is possible that the NPV will also change, due to the cost of the money raised. Those. the total cost, the financial value of the project will be X + Y + NPV at the moment. After the investment is compensated, it is assumed that NPV will be distributed in X:Y proportions, i.e. our interest is X/(X+Y) and the investor(s) interest is Y/(X+Y) shares of NPV. The original question can then be reformulated as follows: how acceptable is this approach to the initial determination of shares when registering a company?

Answer 1

Good afternoon. NPV is my daily bread))
Here is an educational program:
en.wikipedia.org/wiki/Pre-money_valuation
And a few thoughts:
Each Yi investment capitalizes your project. That is, it costs more with it than without it. Actually, this is why NPV appears in excess of X and Y.
I assume that you have a business plan "without investment" and "with investment". The first assumes that your project has not received investment and is growing organically (correct if not), and the second is that it has received investment and is growing faster than organically, which creates additional NPV value.
Where are the snags.
Let's say that by receiving Y1 funding, your project costs X + Y1 + NPV1. At the same time, according to the logic you described, the investor's share in it is equal to (a) Y1 / (X + Y1), and not (b) Y1 / (X + Y1 + NPV1). What does this mean in terms of simple human logic? That the benefit of raising Y1 money is not taken into account when estimating the cost of your project. Is it fair or not? There is no unambiguous interpretation. The art of negotiation. If you imagine a situation where many investors are competing for your project, then the worst option that a winning investor could agree to is (b). Investing is worse (b) is the dilution of the investor in favor of the founders. At the same time, if you imagine that you cannot approach any other investor, and the only alternative for your project is to grow organically, then the worst option you would agree to is option (a). Cheaper than (a) doesn't make sense as it's better to grow organically. It turns out that options (a) and (b) are the fork in which negotiations can logically take place. The fact that you are now at the lower border is a sign that you can try to sell something up.

Answer 2

As far as I understand, NPV is the net profit of the project, that is, roughly speaking, all the money invested! Both yours and the investor (expenses) minus the entire profit from the project (income), provided that the income covered all expenses at the moment.
"Proposed division of shares, based on the contribution to this estimated amount." - it follows that if you contributed $30k to the project, and your investor $70k, then your share is 30%, and the investor's share is 70%. Since NPV implies the contribution of only cash.
Of course, I am not an expert in investment transactions, I just drew conclusions from the description.
If I misunderstood, please correct me.