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Wow, very interesting. My only question is about the 3-5x cap: given how many companies fail/never turn a profit, how is that going to give a return? They must
by friendly_chap 8y ago
Wow, very interesting. My only question is about the 3-5x cap: given how many companies fail/never turn a profit, how is that going to give a return?
They must be really confident in their ability to spot good companies.
Very happy to see alternatives to giving away equity however.
- seibelj 8y agoThey do take an equity stake but it only converts in a future funding round or acquisition. If you stay independent forever they can't provide any pressure. This is basically like normal equity but a weaker form I guess.
- tylertringas 8y agoYes, by default we don't take equity (shares, board seat, none of that). If you decide to raise a round of equity financing (ie VC) we could convert into equity alongside them and if you sell the company we get a % of that. There's a spreadsheet here that lays it out: https://earnestcapital.com/shared-earnings-agreement-digging-into-the-numbers/ https://earnestcapital.com/shared-earnings-agreement-digging...