New answers tagged equity
1
I'd LOVE to have a way that naturally takes into account how much
people END UP contributing, because people will change their minds.
Any clever ideas?
Here's an approach that meets your need that Mike Moyer came up with - a grunt fund calculator:
http://www.slicingpie.com/the-grunt-fund-calculator/
His book Slicing Pie has had good reviews & ...
1
I like this calculator. Foundrs.com
I think it does a short and simple factor of the major contribution points in a small tech startup. It puts a lot of weight on the lead developer, the most critical portion of a tech startup. That person (you in this case) typically ends up managing new hires (developers) and making other critical business decisions ...
0
someone with loads of experience and money would be running the show
This is interesting because the term-sheet is the new employment contract. The nexus is the tradeoff between sweat and financial reward. Some points
As minority shareholders, you will always be outvoted so what happens if there is a call for capital contributions? Are you prepared to ...
2
So, did this person actually write your software or did they outsource it to this other developer? I don't think I would want to bring in a "technical" partner who isn't actually the programmer on the product. He will still have to pay his developer and if the future work is sweat equity then that probably won't work out very well because he still has to ...
4
I see two huge warning flags -- and will get to them in a second.
Jordan Cooper once wrote a very informative blog post with the valuation ranges he saw in NYC. Quoting his post:
Still at your old job
You have an idea you’ve been thinking about, been working on it nights and weekends and maybe you’ve pulled together some folks to help you work on ...
1
Costs, and earnings projections are likely to make you seem
amateurish to a VC or an Angel, so drop those, when talking to
serious people :) (You may want to consider pitching anyway). Web
based business is anything but predictable.
The single most important thing a VC, and Venture funds look for is
the team, so you better put together one. Again, you ...
1
A few things you must know:
As frenchie said - nobody will invest if they see that none of the founders are full-time on this regardless of the investment.
This may sound a bit weird but - don't start developing the product just yet. Sometimes its better to sell the dream on presentation rather then a half baked product. Some investors might just say ...
0
1-2% but only if this person truely contributes to your business directly.
make sure you know exactly how and why you're 'hiring' him/her. set scheduled weekly "board" meetings. If its only for the first two months, then maybe you could just set an amount to be paid after initial investment for their consultation.
1
In Ontario, for example, you can set up a company with multiple classes of shares. One class may have voting rights, another not. Within the class that has voting rights, votes are split proportionally.
BUT you can also set up a shareholder's agreement that states what percentage of votes is needed to make changes, how many seats on the board of directors ...
2
You'd have to check the bylaws of the company and it may also depend on your jurisdiction and differing classes of shares.
0
Just as there is no formal occupation as start-up 'side kick' there is no formal obligation; unless a legally binding agreement is made.
That said, I would recommend learning about 'vesting' and how to word that in any agreement you make moving forward. It will save you from parting ways with equity BEFORE any substantial investments of time from the 'side ...
0
For a very good reason that in the US, the JOBS act was only passed last year and SEC are behind the eight-ball in issuing guidelines (supposed to be Jan this year). However, professional investors (those the tax-dept deems rich enough not to feel ripped off) have always had access to private placement or angel syndication platforms.
It's not the lack of ...
0
Normally ownership of shares is considered an asset unless company trading whilst insolvent in which case it is worth zilch if LCC. Your credit rating is actually a scorecard managed by a very small number of discrete firms that track your PAYMENT history, not your net worth. On the otherhand, some investors when doing a due dilligence might mark it as a ...
0
Imagine this scenario: 10 years from now, you're working on getting funding for your 3rd startup and the VC asks you where you went to school. It just so happens that the cousin of his brother-in-law knows the neighbor of a professor there. So the VC sends a quick Linkedin message and asks about you. Now suppose the professor says "oh yeah, we remember him: ...
0
Would you take $100,000 for 10%? Many pre-revenue start-ups would and there are several incubators that provide funding in that range. Doesn't sound like a bad deal providing the terms aren't too onerous.
0
OK, breaking down the question into its components
Assets + Expenses = Equity + Revenue + Liability
and gross profits is Revenue-Expenses and you get X% but only for 10 years. Since equity is by definition Assets-Liability - Profit the question is whether the profit is retained (goes into the asset column) or paid out as dividends (apportioned to equity). ...
0
There is no such thing as "typical" deal because everyone bring different value to the party. What the structure described is basically earn-in, reaching certain revenue milestones triggers value accretion (in terms of recognising equity participation). Now your concerns are
total split between dev v management - without knowing the product (some ...
2
Perhaps you could calculate the percentage based on what it would be if you did include vesting from day one. Considering that you left after six months typically you would get nothing because most vesting kicks in after one year. (E.g. 25% after first year and 25% each additional year prorated monthly.) However, you could consider a vesting schedule, e.g. ...
1
You got $10k. Not $1. They are taking a big risk. There is a time limit so I don't see the problem.
You can walk away from it - that's your choice.
Worst case scenario for you is that you have to give up 1% of your company after it is worth billions.
Is that a bad scenario?
Keep taking a 0 off the end of the valuation. Are there ANY scenarios ...
1
That sort of arrangement is actually pretty typical from universities, but it usually happens in licensing deals: "We give you this technology, and you give us an undiluted 2% of your company until X happens." And, 'X' is usually something like the passage of time, an equity round of $5M or more, etc....
It's not that onerous if it's 1% of the common (or ...
0
First of all, there is no gauge or scale to get equivalence between the two things you want to compare. Neither is an industry standard. Value, in general, is subjective and you two need to gain agreement and thats what will define how valuable is to you what he provides and viceversa. That said, IMHO industry connections and expertise has a higher impact in ...
1
is demanding that everything be split 50/50 from the very first check we get. Which goes against his written agreement.
The usual rule of thumb is that reward should match risk. The issue is the division between equity (dividends from profits after expenses) and operations (salary/expenses). There are 2 ways of negotiating
positional - ie only ...
0
Consider using the Founders’ Pie Calculator by Frank Demmler at the Tepper School of Business at Carnegie Mellon University. Another good resource on the subject is "The Great Divide: Splitting Founder’s Equity" by The Daily Muse.
4
If I were the other members of the team I would be interested in buying you out.
A reasonable number might be $30,000?
You could have earned $60,000 at a normal job, but instead you took a risk and you are now folding your hand - so I wouldn't expect you to get paid more than you would have if you took the safe route.
Also, you are leaving the company ...
0
The best equity model for this kind of thing is a dynamic model that will make sure you each have exactly what you each deserve. Here is a template for a dynamic model: http://www.slicingpie.com/the-grunt-fund-calculator/
0
I don't know a standard template for this but here's what I do:
To finding some eligible candidates, if I know someone or know someone how may knows someone, start from there, otherwise post a flier (i.e. in some online job board).
At interview, ask about educational background and career and ... but tell nothing about the plan (equity offer). If you find ...
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