5 ms·
Ask HN: Would you go for the Hail Mary?
What would you do in the following situation?
Let's say you are a significant share holder in a startup as a managing employee. The startup hac been backed by a single party since it's inception 4 years ago. Currently the startup is running at about a 50% loss after earnings have doubled year over year for the last three.
Recently the backer has had it's earnings drop and as such will no longer back the startup effective immediately. While the timing was not known this did not come as a surprise and the startup has been seeking outside investment since July and is close to setting something up, actually starting technical due diligence the day before the word from the backer to shutter came down to send the employees home while keeping the executive on for a time to tie things up.
We the startup executive team came up with a plan. We proposed that we would give up our salaries in exchange for 30% of the startup and that the employees would be kept on keeping the team intact for next 2 1/2 weeks. With the hope that significant progress is made on the new funding. Surprisingly the backer agreed.
Crazy or worth the gamble?
btw, I'm looking for someone that could look over the paperwork with me.
- fencepost 12y agoAbsolutely worth the gamble if you think there's realistic potential going forward. It's a chance of giving up 2.5 weeks of pay to keep a 4-year company going longer term. If it flops, you're out a couple weeks pay but hopefully can take it, you've kept your staff on for a couple extra weeks, etc. If it succeeds, you've delayed pay for the executives by a few weeks (it may not be lost - much will depend on structure, etc. but if you're salaried and the startup is independently incorporated, it may be legally obligated for those 2+ weeks of pay), you've shown the staff that you're willing to give up your own pay to keep them on (loyalty!), etc.
- gus_massa 12y ago* If you follow this idea, get the 30% equity in a signed written document. * Who owns the other 70%? * Who will pay the employees? Servers? ... * Have a plan for the 3rd week. What would you do if the funding doesn't appear?
- Varcht 12y agoSorry to take so long to get back, busy day. The team already holds 10%, the backer will retain some, some offered for investment and some reserved for future. Backer is committed to pay the employees for a time as well as keeping the lights on for a time. In the 3rd week if investment is eminent we would reevaluate, else I guess we tried.