Business planning · Equity

Anti-Dilution Clause

Remi Mičiulis Building a strong team, looking for technical co-founders https://www.remi-net.uk/legal/r-team/

July 1st, 2018

As a Founder, I want to protect my co-founders from Anti-Dilution Clause. We agreed (verbally for now) that equity amount is held by them now, will NOT decrease in value if more shares will be issued (we focus on % named on the shareholder agreements).


What is better, sign the agreement about Anti-Dilution Clause or review other options?

Thank you

David M

July 2nd, 2018

For starters you aren't protecting them "from" an anti-dilution clause, you are providing them one or protecting them from dilution. I am assuming that is what you meant. And yes you absolutely should have one if you are an ethical CEO. I won't be involved with a company without them signing my contract that has an anti-dilution clause. Any would be co founder who comes in contact with a founder who wont provide one should run...and fast!


The bottom line is without one, dilution is possible, so yes I would suggest you have your co-founders sign one. Your % of equity seems fair in general for co-founders. Some form of vesting schedule makes sense. You can also look into % of sales or revenue. I work with entrepreneurs to build their companies. My contract is for % of sales +% of equity. If you are providing salary these numbers can decrease some. But % of equity means nothing if the company is not managed correctly and/or pays a dividend or is acquired. So if you are an ethical entrepreneur which it sounds like you are striving to be, you need to provide not only compensation that pays out one day if the company has great success, but you need to provide compensation that rewards the employees' work as you build the company. I had a conversation recently with a lawyer about this and we were talking about all these entrepreneurs hold on so tight to equity and fail to see it as an investment tool in finding great co founders. Most fail because they never attract the level of talent that can support success. I talk to one at least once a week.


If you are an entrepreneur and you are scared to give up equity as an investment in exchange for work done...leave..go..get out of the business because you give entrepreneurship a bad name. There are too many startups with greed in their hearts. Too many holding on to 100% of nothing.


But when you are talking about compensation the best thing to do is write all your ideas down but then go sit down with an attorney and make sure you have all the contracts locked down as they should be.

Remi Mičiulis Building a strong team, looking for technical co-founders https://www.remi-net.uk/legal/r-team/

July 18th, 2018

Thank you.

We are considering a few COO applicants, to deal with internal Operations.


We are keen to do/create everything ''in-house'', but will see how far we can go.


Hardest part is to find Software developers who want to join in as co-founders

Remi Mičiulis Building a strong team, looking for technical co-founders https://www.remi-net.uk/legal/r-team/

July 2nd, 2018

@ David M

Thank you for in-depth respond.


I also agree that here is no need to be 'too tight' in equity shares, but it must be within reasonable limits.

E.g. I had an a soft. dev. applicant in 2017, who was asking for at least 40% of equity shares.

Possible Angel investor (greedily) said that he will take at least 50% of my Company for £20k investment. My answer (of course) was NO.


As I am building a strong team (I need at least 9), all co-founders will have (a few %) lower shares, compare what I could offer if I only needed 3 - 4 co-founders.


Thank you

David M

July 2nd, 2018

Remi, yes those percentages are too high. I have had entrepreneurs offer me 40-50% of their company and I have to tell them that is way too high and they are not thinking it through. I actually had one offer me 51% and I could not help but start laughing and say "whoa...you really want to give me your company. Im good..but Im not going to do that." Pretty funny actually. Anyone who would ask for those numbers is not competent. On the flip side anyone who would offer 1% to a cofounder or individual bringing major partners that lead to success is not experienced or competent, or greedy one, in the process. Your approach seems solid and fair and I commend you for that, because many entrepreneurs in this forum especially are pretty clueless.


Your comments of anywhere from 4-10% in the other forum make sense. These are people who will be bringing elements to build your company into profitability. Depending on how make or break those contributions are, or how much time and work they put into the company your range is adequate. I provide strategy and open doors to major players. My range is generally 5-10% of equity and of sales. That number goes up the less established, qualified, or competent the entrepreneur I am working with is, but there are other factors as well such as the amount of time I will be investing. If I am going to have to re-work business plans and create new strategy I am essentially acting as a founding COO and therefore the %;s increase. Also, is someone paying me a salary or not.


I would be interested to hear more about your company and if I can support what you are working on.