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So first of all - you kind of want it all ways. You think its going to fail but you want a piece of the action "just in case". First step - pick one. If you t
by junklight 16y ago
So first of all - you kind of want it all ways. You think its going to fail but you want a piece of the action "just in case".
First step - pick one.
If you think its going to fail and your partners are just wasting their time. Sign it all over them. Assign them the IP and walk away.
If on the other hand you think that while your involvement has come to an end - that they still have a chance then sit down with them. Get it setup in a form where you can have equity and agree what share of that equity you will have - but it sounds from the agreement you already have you have 25%. Sign over the IP to this entity (they won't be able to sell it or do anything if you don't do this - and you want to give them a fighting chance). If you still want to be an advisor or they do - then that is your choice. The net result of all this is that you will be a shareholder with your investment being the work that you did.
A Note on amount of equity: You have put two years work in at the riskiest part of the game (at the very start when everything is unknown). They might want to argue you down a bit because it's still very high risk - and that would probably be fair - but I would say that's their call if they want to go down that road. Ask yourself if they would have any chance going forward without those 2 years work.
- kleine2 16y agoI think you also need a valuation for the company so that as they continue to put money in (and assuming you will not) you know how much you should get diluted by.
- junklight 16y agoYes. Sorry was assuming all that. You do need to become an investible entity which involves a valuation , cap tables and all that nonsense. We needed to do this early on as well - because we had some early people who we paid in stock and not all of which worked out for one reason or another. Its a pain at first but to be honest it also brings a bit of rigor and discipline to the company as well.
- roel_v 16y agoAny care to explain or post a link to an explanation of what a cap table is?
- roel_v 16y agoI'm seriously wondering what is up with the voting the last couple of weeks. This is a genuine question, asking for an explanation of a term that I don't know. Why would anyone vote this down? Is there a 'basic knowledge' rule I violated here? (sorry about asking about downvotes for the second time in two days - I'm just wondering what changes I need to make to my posting to not annoy people so that they don't have to vote me down).
- junklight 16y agoWell I didn't find it annoying. So basically the cap table is a spreadsheet of who has what percentages of equity (and numbers of shares) in the company and then for any given dilution event (typically investment) shows how your percentages will change - and being a spreadsheet obviously you can play with the values to understand how things change. So it lets you model how investment alters your share holding. It lets incoming investors understand the share structure of the company (and who holds power etc) and ours has a couple of columns of what we might earn at given exit values - this is kind of incentivising but its also useful once you start talking about preference shares and multipliers. It is also a useful tool when negotiating on an investment because you can see what the implications are - for example say an investor was asking for 2% more - you might be able to see that it hardly makes any difference and isn't worth arguing about - or it might be absolutely critical. Investors seem to want to see this as well.
- roel_v 16y agoThank you.
- legalhelp 16y agoNo one is sure about sticking it out with this company and I doubt any of the owners would want to put the time and money into becoming an investible entity. Without becoming an investible entity, I have no guarantee that I will receive anything - other than the written contract we sign, right?
- junklight 16y agoIndeed. If you can't even get it into an investible entity then i'd just walk away. Sure there is a slight risk what sounds like a miracle will happen but it doesn't sound like the others have the enegy to do this. You don't get to make a successful company without comitment. Chalk it up to experience.