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The way it was structured would have allowed him tax avoidance on the investment, but also not be considered an investment but rather a silent cofounder, which
by hughes7370 7y ago
The way it was structured would have allowed him tax avoidance on the investment, but also not be considered an investment but rather a silent cofounder, which would allow me to accept a low valuation without having a negative impact on the next round. Otherwise, it needs to be explained why the valuation was so low.
- vikramkr 7y agoThat still doesnt make sense. Was there no clause that said that he had to put in the money? And why is it a big deal to explain why the valuation was so low? I'm really co fused by what the reasoning was or even why you would spend time on closing this deal if, as you said, you had other term sheets lined up and have experience in this. Is there something we are missing here? Like is this not in the US or was the money desperately needed or something? The takeaway seems to be less about doing due diligence on investors and more about avoiding insane contracts- I'm still having trouble figuring out what exactly even happened. Thank you again for sharing this experience with us - I'd really love a bit more context if you wouldn't mind so I can understand the takeaways better. And in the meantime definitely get a lawyer.