Valuation is arbitrary before there are financial or other metrics with which to reason about comparables.<p>How much can you ask for with a straight face? How much do you need the money? (What's your 'BATNA'?)<p>Be honest about the prospects of losing all the money, and your hopes for making a lot. (With friends and family, be especially clear it could all be lost without recourse.)<p>If you trust your profit projections -- or at least the relative likelihood of different good, middle, bad scenarios -- you can do a discounted cash flow analysis, weighted by the different outcomes. Of course, it's all fantasy, but it's a way of deriving a bottom-line valuation from some numerical assumptions, and then you can argue about the assumptions.<p>You certainly can have contractual terms which give them first claim on dividends up to some rate, or where their returns are capped at some cumulative return, or where you have buyback rights at predetermined prices, and so forth. I think these are more likely when the outcomes are better understood -- for example when entrepreneur and investors are known qualities in a predictable market.<p>With something highly speculative, a vanilla "you have X% of the venture, boom or bust" may be safer, and less likely to make things weird if you later pursue more institutional investments.<p>Also: be sure to understand 'accredited investor' rules (or the equivalent in your jurisdiction, if not in the US). Don't skimp on good legal advice.