Our core business is in a niche area, but we have the opportunity to get some angel funding to enter a related but much larger market. We are planning to enter this market in the long run anyway. Moving now would provide some risk diversification, give us the cash to cover upfront costs and provide some miscellaneous administrative support. Also first mover advantage. The business model would be validated early, or fail early. We'll know in a few thousand dollars so it isn't really high risk.

We could take this step on our own, but we're bootstrapping and can't afford to split our resources to support two products. So the advantage is really avoiding a delay of at least six to eight months. There is no risk of dilution to our existing business, so that is not a concern.

The question is how to value an angel investment in a business like this where there is a small initial investment for market testing and an agreement for how to move forward if it makes sense. To me this means figuring out a reasonable value for our own contribution. But what is that? The costs of building the tech side from scratch? The opportunity cost of the people who need to manage/execute? Does the market value of our labor even matter if we are taking equity?

I understand that the answer is always "we need more details", but it is hard to do that without being overly specific. Apologies for being obtruse. I'd appreciate hearing about any relevant factors that came into play in any similar agreements any of you have run into.