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"In most cases, we’ll agree on a long-term residual stake for Earnest if you ever sell the company or raise more financing. We want to be on your team for the l
by javery 8y ago
"In most cases, we’ll agree on a long-term residual stake for Earnest if you ever sell the company or raise more financing. We want to be on your team for the long-term, but don’t want to provide any pressure to “exit.”"
This seems to imply that they get a % of an exit or future financing even once the cap has been reached. That is functionally warrants right?
- VintageLight 8y agoThey get a % of an exit if you haven't fully repaid to the cap
- javery 8y agoIf that's true I take it all back, but the way I read "long-term residual" was that even after you paid it back they still got a piece of the action.
- tylertringas 8y agoOnce Return Cap is fully repaid the founder can run the business profitably forever and not pay us anything more. We do typically prefer an option for a % only if the business is sold but can do a deal (with a higher Return Cap) that excludes this easily.
- javery 8y ago"Our default terms now include a residual “stake” for Earnest after the Return Cap has been fully repaid."