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I am the ex-founder of a company that has had some moderate success, and I own a 5% equity stake. They're about to raise money at a $XX,000,000 valuation. I am skeptical of the company's future and want out. The hardball CEO offered $100k. What should I do?
Ask for more.
In that light, are your existing shares worth more than $100k at the current FMV?
Make up your mind.
So you don't believe in it, but still you want more money. Make up your mind.
I would not take a lump some in most cases.
- Company gets to re-concentrate their ownership among active investors/employees, and remove "dead wood" ex-founder with small stake from the cap table. This alone might make it worth their while.
- Investors get shares more cheaply than they otherwise would
- You get cash and get to wash your hands of the company
Where this might get complicated is that you likely own founders' shares/common and the investors are getting shares with a bunch of preferences.
If the latest funding round is $20mil, 5% of that would be 1mil. What's the 409(a) value on the common shares? I doubt the shares would be worth more than 500-600k given the numbers above, so with a 20% discount, you're looking at 400-500k. I have no idea what the headline valuation is but you can probably work something out. Email is in sig if you want to talk.
EDIT: Another option would be to sell a portion, but not all, of your shares as part of the funding round. That might allay any "we can't afford it" concerns from the company while still giving you a bit of upside in case the business is a real home run. Would they take 10% of your position for 100k? That might be a good option.