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The problem with your ask is that early stage capital is for growing the business, not liquidating founders, and investors are not interested in giving anyone c

The problem with your ask is that early stage capital is for growing the business, not liquidating founders, and investors are not interested in giving anyone cash to liquidate a founder. Additionally, your valuation is currently underwater and even that is assuming a functional founding team.

deleted 6y ago
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jiveturkey 6y ago
It's not OP's ask! Please explain more what you mean about the valuation being underwater. I don't understand how that is, nor how that is even possible.
- defen 6y ago
  The investment was at a $1 million valuation and the company currently has 40k cash + allegedly, the possibility of 60k/year from ads. Unless there is significant growth potential, the net present value of the company is much less than $1 million.
  - deleted 6y ago
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  - jiveturkey 6y ago
    ah thanks. yes, all startups operate "underwater" then. that is the operating model. as to the use of venture capital, indeed, no investor will ever allow this -- if they have a say. seed stage funding is most often convertible debt, and the investor does not have a say (legally; but you damn well better do what they say anyway). i'm actually quite surprised that a seed investor would be noncommittal on it. however, 1/ that's the other cofounder's problem, not OPs. the way you phrase it is as if the OP is putting the other cofounder out on a limb with an unreasonable request; that is not the situation here. 2/ the other cofounder doesn't have to use capital, they can take on debt (convertible or straight debt). It's an absolutely wonderful tradeoff if the business will be run better and more efficiently with just the one cofounder. A no-brainer really. Not doing it indicates a scam. In both cases, OP should insist on a buyout. So there's really no difficult decision here -- on OP's part anyway. Of course with the business being "underwater" we are talking about a personal guarantee on straight debt. So again, how much does the other cofounder believe in the business and that his motives are pure? The other cofounder can sidestep this whole thing with various shenanigans, however that doesn't mean OP should just submit. A year of OPs life is worth it to stick to his guns, even if the outcome is inevitable. It's not as if OP has to invest any effort to see through his position.

deleted 6y ago

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jiveturkey 6y ago

It's not OP's ask! Please explain more what you mean about the valuation being underwater. I don't understand how that is, nor how that is even possible.

defen 6y ago
The investment was at a $1 million valuation and the company currently has 40k cash + allegedly, the possibility of 60k/year from ads. Unless there is significant growth potential, the net present value of the company is much less than $1 million.
- deleted 6y ago
  [deleted]
- jiveturkey 6y ago
  ah thanks. yes, all startups operate "underwater" then. that is the operating model. as to the use of venture capital, indeed, no investor will ever allow this -- if they have a say. seed stage funding is most often convertible debt, and the investor does not have a say (legally; but you damn well better do what they say anyway). i'm actually quite surprised that a seed investor would be noncommittal on it. however, 1/ that's the other cofounder's problem, not OPs. the way you phrase it is as if the OP is putting the other cofounder out on a limb with an unreasonable request; that is not the situation here. 2/ the other cofounder doesn't have to use capital, they can take on debt (convertible or straight debt). It's an absolutely wonderful tradeoff if the business will be run better and more efficiently with just the one cofounder. A no-brainer really. Not doing it indicates a scam. In both cases, OP should insist on a buyout. So there's really no difficult decision here -- on OP's part anyway. Of course with the business being "underwater" we are talking about a personal guarantee on straight debt. So again, how much does the other cofounder believe in the business and that his motives are pure? The other cofounder can sidestep this whole thing with various shenanigans, however that doesn't mean OP should just submit. A year of OPs life is worth it to stick to his guns, even if the outcome is inevitable. It's not as if OP has to invest any effort to see through his position.