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Ask HN: What questions to ask when somebody offers you an equity in his startup?
I own an IT service company providing development services to clients.
Recently one of our clients offered us an equity in his startup against the development services we provide.
He will give us shares worth of X amount per month for 3 months. The risk on our side is 3X/2.
He is planning to sell his company in next 6 months. He has done that before also. But for us this is the first time.
So I was curious what questions should I ask him before accepting or rejecting the equity offer?
I am sure HN community knows the best about this.
Update: The beta version of the product is launched and it got covered by ReadWriteWeb.
- bartonfink 15y agoJust as a starting point, I'd want to know how many shares are outstanding, are the shares dilutable, is this a grant or an option (where you don't have shares per se but you have the ability to buy them from the company)? If it's an option, what's the strike price (the price you buy them at)? I'm not even very knowledgeable about this, but just knowing a number of shares tells you about as much as if a baker offered you "pieces of cake". There's just not enough information present.