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Say I have a brilliant idea for a startup, and need to raise $5mn from private investors. I have a BP that shows that in 5yrs investors can have a 20% return per year, after i took out my share of the company, in this case 25%. So, investors keep 75% of the company and for the 1st 5yrs have a return of 20% per year. BUT... if my projections are wrong and i deliver a greater return, i would like to have a bigger share. Lets say,i would like to have 35%, not 25%, if investors could have 30% return per year with a 65% share of the company.

Is it fair? How do I structure this?

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Any if you're projections are wrong the other direction are you willing to take less? Sliding scales need to work both ways. – Dane Dec 7 '09 at 18:17

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I think you need to do a little more research into what investors are looking for.

How are you "taking out your 25% share"?

I don't think anyone will take you seriously with that equity proposal. You might be able to have bonuses tied to performance, but (IMO) sliding equity for a founder is probably going to land you in the "not serious" business plan pile...

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Ignoring the compensation structure, 5 years is a long time. Consider raising less money for shorter milestones. $5M is also not very much cash for a 5 year runway; most would tell you $20M is a better number (than 5) for 5 yrs. However, I say this with no knowledge of what type of business you are talking about.

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