Hot answers tagged shares
7
Sadly for you it doesn't work like this. These guys have the vision and the money, so all they need is the capability to deliver which they can get from any decent developer. Yes, you built it, but just like when a property developer gets builders in to build that fabulous house, it isn't the builder that takes a big slice of the profits. You just pay the ...
6
What am I sacrificing by letting him having 55% of the shares, other
than the profit?
Control. Generally, decisions are made based on the majority vote of the shareholders. If he holds more than 50% of the shares - he decides everything, and there's nothing you can do about it.
6
I would draft up an agreement that outlines you are leaving "XYZ.com" and that your friend has 100% of XYZ.com can keep the domain, the website etc. It's 100% his. The outline would also say you are welcome to pursue this concept and market with a new company in the future if you want with no obligation to your friend or XYZ.com for any royalties, ownership ...
5
To start with, let me ask you, "Why are you not happy with 45%"?
Merely getting a website done is not building business. If you friend is one who:
Came up with business idea and decided to go in the business.
Going to take care of operations and business side of things.
then he probably deserves his share. He can always get the same technical thing ...
3
What you can expect is that if your large portion of the company shares remain, it is unlikely that you will secure funding. The term "absent cofounder" is also concerning - if you both are elsewhere, who runs the ship?
As an advisor, you should have more information about what the investment deal is and the stipulations surrounding them. Sit down with the ...
3
Don't be upset after seeing the previous three answers. While they are all great points, you may have other choice.
As Joel mentioned in another related question, Forming a new software startup, how do I allocate ownership fairly?, equity is mainly about risk-taking and vesting. (You may also find other great points there)
It's nothing wrong to get a ...
3
Par value is not subject to restriction by the state. Very low par value, such as you have suggested, is permitted.
However, in DE par value does have an effect on the franchise fee that is payable. Please see In Delaware, No-Par-Value Can Cost a Bundle.
Yes, when shares are issued, (at least) par value must be paid. However, there is no requirement that ...
3
Your mixture of partnership, corporation and LLC terminology makes it a bit difficult to understand the scenario you are describing. Nevertheless, I believe I can provide direct answers to your specific questions:
There is no rule of thumb.
The only relevant terms I can think of are parent and subsidiary.
I suspect that you will not find the foregoing ...
2
I'm a little confused on what you're trying to do. Honestly I am not aware of any possible way to freeze shares, I'm pretty sure that's not legal. You might be able to buy shares through 3rd party (if the incubator is unwilling to sell them back to you), then buy them back from the 3rd party at a premium.
As far as the loan goes as @Steve Jones said factors ...
2
From everything I have seen, yes, professional investor will not touch your company with that kind of condition, since your motivations are not aligned with that of investors'. Really good book worth 1000X the price of it is The Founder's Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup.
Especially read the section on Rich vs King. ...
2
If the 5th seat goes to one side or the other then you're basically agreeing up front who wins the vote if there's a tie. That's true whether the 5th seat actually goes in some way to one of the other 4 people (someone gets more than 1.0 votes) or whether it goes to a good friend of one of the 4 people already on the board. You might try to get both sides ...
2
When two friends found a company from scratch and are both there working, from the first minute - things usually go 50/50.
But your friend came late and worked less than you.
The answer, however, in this case cannot be base on "time spent working". in 4 years, your 6 months of 'extra work' compared to your friend will mean nothing.
You should judge your ...
2
My advice would be to take the money and run. You are being offered cash for shares in a pre-funded company that may never make it at all if you fight them on the sale. Many investors don't want absentee owners and many will not invest if they think there is going to be a problem.
The price of the share should be equal to whatever the value outside ...
2
I think the problem the company is facing in terms of raising capital isn't a matter of outstanding shares. The problem is that a co-founder left! And if I'm an investor and I find out that a co-founder wasn't willing to invest his time into the business then why should I invest my money?
2
Just agree to give him 1% (which, is an arbitrary amount) when your company is ready to raise your first round of capital. OR, if you raise no money he will receive dividends as a 1% stock holder. The actual number of shares will be clear when your company is up and running.
The problem is that your cap table is far from settled and you are forcing ...
2
I am not a lawyer, but I've been in a similar situation. First, I would advise you to consult an attorney about setting up a formal corporate structure on your own. Don't guess and most of the time it won't cost you a lot of money. Its unlikely your collaborator has any claim on the business, but laws vary by state and country.
In reality, there are no ...
1
Karlson is of course correct that few startups would ever consider this question when they are typically facing the myriad of other challenges that startups must confront.
However, if this answer might benefit an entrepreneur with an unusually far-sighted business plan:
Pros of returning private--
Consolidating legal authority for the executive and ...
1
If you're worried about this, you might look into the concept of "Right of First Refusal."
Basically, it means that you get an opportunity to match any offer made and in the case of equal offers, you win automatically. It doesn't force a sale, it just gives you the opportunity to match the offer. It also doesn't force you to buy it, you could decline.
It's ...
1
how are the shares handled in a will?
Will is a legal document that defines how to deal with the property of the deceased. Asking how the shares are handled in a will is redundant. They're handled as prescribed by the deceased.
If there's no will, then they're handled based on the local inheritance laws and transferred to heirs with all the rest of the ...
1
It seems that it would be favorable to both you and future investors to make a stock transfer as cleanly as possible. The number of stock-holders is small, so my vote would be to use the existing shares rather issuing new shares.
A related point is that Delaware has the following calculation of franchise tax based on your issued shares, so this may be ...
1
I'll gladly pay you Tuesday for a hamburger today
J. Wellington Wimpy (and countless non-tech startup CEOs)
You have skills. They have ideas. No one has money.
I think that the referenced post really does a good job of spelling out the economic gains / risks inherent in these sort of arrangement.
If you bored at your current job and want to ...
1
It really depends, are they pre-money? is the company profitable? are they even looking for a CTO? is their product tech-heavy? what size are they? as you know the duties of CTO change dramatically when a company reaches a certain size, from being the lead developer of the project to determine projected costs of new features and hiring other brilliant ...
1
Entrepreneurship isn't really about the "know-how", it's about the "know-what".
You had the know-how all along. In fact, most people with a programming background could have started just about any of the big software companies that once were just startups. The key skill isn't knowing HOW to program, it's knowing WHAT to program (and also what NOT to ...
1
Stock grants are stock. If company does not certificate (and most don't, since paper shares are pain to deal with), your name, number of shares, and their class is entered into the journal. Options are just that, your option to purchase stock at certain price. Until you purchase the shares, you have no ownership in the company.
1
This is a very common issue and what you should retain has a lot to do with the circumstances under which you left the company and the types of contributions you made while you were there.
There are four circumstances under which a person can leave your company based on two variables. The variables are “how” and “why”. The how can be that they decided to ...
1
Canonically, about 99% of all product startups fail. Why does this product seem like such a solid bet? Has your founder built full GUI mockups and tested them on hundreds of people from the target audience? Has your founder secured orders and down payments for the yet non-existing product?
You're trying to discuss how much ownership you could hope to ...
1
If you're unpaid, then the only thing you can do is get equity or some sort of right to equity, like options.
So, then, the problem is one of getting equity to people in proportion to their contributions. Right now, this engineer has done 100% of the work and (presumably) provided 100% of the financing, so should get 100% of the initial equity. But, ...
1
Try evaluating how much work in total would project need in order to start generating revenue/acquiring financing. You can do it in work hours or work hours* hourly wage which is harder (because it's harder determine realistic €/h rate for specific work), but can bring you to fairer share. So for example: you invested 2000 hours of work as a developer, while ...
1
How long do you expect to buy his services for this percentage of the company?
You should be tying that percentage into a vesting period -- if you expect 15 hours/week for a year, then that may be 10%; if it's for two years, that may be 15%. In either case, make sure that his ownership is tied to continuing to perform -- that's usually accomplished ...
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