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I agree that a chunk free from vesting makes sense, but translating sweat to dollars is contentious. For a couple reasons I can think of: 1) Why should the inv
by Domenic_S 13y ago
I agree that a chunk free from vesting makes sense, but translating sweat to dollars is contentious. For a couple reasons I can think of:
1) Why should the investor retroactively pay your made-up salary for the privilege of investing? Valuation has something to do with the assets or future assets of the company; a salary is a liability.
2) How much is that sweat equity really worth if the company turns into the next salesforce/facebook/etc? Many millions upon millions. Any typical estimate ("let's call my salary $100k over the last 2 years....") is going to fall so short that it's useless.
- prewett 13y agoFor #1: investing in the company I founded is definitely a privilege. The investor obviously thinks that my company would provide a better return than investing elsewhere. High rates of return are not easy to find, hence it's a privilege to invest in the company I founded, in the vision I am creating. Disclaimer: I am not actually founding a company, nor have I in the past, nor am I likely to build a company that requires VC investment, but this is what my attitude would be if I were.
- Domenic_S 13y ago> The investor obviously thinks that my company would provide a better return than investing elsewhere. And you obviously think taking the VC's money is more valuable than taking a bank loan/cash advance/going with another VC. Both sides have something to gain. Only thing is, if you're looking for VC money you need the money. The VC doesn't need to invest in you.