111–120 of 172 posts
Every offer deserves a counter offer. But if you can put the 100k to use, that is a good option. That is two seed rounds for companies you believe in :-)
- Get a good lawyer, it seems expensive, but is cheap compared to getting a bad deal.
- In deciding between cash vs. equity, a useful way to re-frame is "If I had it all in cash now, how much equity would I buy at this price?"
- The CEO has much better knowledge about the company, and an offer to buy may be a signal that there's positive information unknown to you.
In my case, I refused the lowball offer though the amount of cash was tempting, figuring they were making an offer for a reason. A few months later, I was offered 4x the price as part of a funding round. I took it without further negotiation, since that was enough to make a significant lifestyle change.
What about waiting until the funding round is over, and then sell the shares yourself?
The bad point is that the OP will then have to do all the hard work on the transaction whereas right now there are willing buyers.
$xx million valuation doesn't really matter. How much money are they raising? 1 million? 10 millions? I'm asking because the metric (or the thing you'll eat from) is the money raised not the valuation.
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+1. Most folks here don't understand that 5% equity is easily diluted to 0.005% equity in 6 months. So now you are going to spend $50k suing the company for the $10k they owe you. OP needs to listen to people who have experience (like you) instead of random strangers who think equity = cash
You don't dilute 5% to .005% in 6 months without moves that at best are questionable and at worst are illegal, especially if your shares are diluted and some others are not.
How does that work in practice?
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You don't dilute 5% to .005% in 6 months without moves that at best are questionable and at worst are illegal, especially if your shares are diluted and some others are not.
> especially if your shares are diluted and some others are not How does that work in practice?
Ask the CEO whether the investors would buy your shares as part of the funding round. I've seen a company do this. It's a win for everyone. Offer a moderate discount (10-20%) to make it worth their while. - 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 s…
Excellent advice and worth suggesting, but talk to the CEO first to make sure the company speaks with one voice otherwise you might imperil the funding round.
Earlier quoted context omitted.
Excellent advice and worth suggesting, but talk to the CEO first to make sure the company speaks with one voice otherwise you might imperil the funding round.
I would open to advisory roles, part time or golden handcuffs (stay for a year) when you speak with CEO. Rounds are hard to get (despite Hollywood) and investors are super turned off by founders arguing. In startups, getting 0 is the norm.
Don't sell. If they are about to raise, then this is the perfect time to sell your shares to investors in the secondary market. If you offer your stake at any discount, they are irrational if they don't take it. Don't worry if you are bound to a non transfer-ability clause. Getting around that is always possible with a bit of lawyering. Also get someone else to handle the transaction on your behalf. You don't sound l…
For most practical purposes, there is no such thing as a "secondary market" for private company shares for "moderately successful" companies like these. The shares themselves will be subject to a shareholders agreement, the boilerplate for which prohibits their unauthorized sale.
The shareholders agreement, even if 'boilerplate', may only give the company the right of first refusal on the sale of shares. Even if unauthorized sales are completely disallowed, if you find an interested buyer there are still ways to craft a legal agreement where you for all practical purposes have 'sold' the shares.
But if the company isn't very successful, there may not be any investor interest, which would make the legal details pretty irrelevant.
I'd recommend getting an attorney to read over your agreements, and also try and gauge investor interest by listing your shares on one of the secondary market marketplaces.