Startups · Equity

Collecting equity after the fact?

Korsakov

March 28th, 2015

A couple of months ago, I found a start-up with a hardware/software product geared to promising markets. They have recently split into two entities, each entity serving a different market but practically with very similar products. There are two young co-founders whom I got to know personally. I get along very well with the lead developer. My request to purchase equity/receive sweat equity was most likely rejected by the third founder who joined later, invested and received 15% equity. He has access to his wealthy family with significant manufacturing capacities in Asia. So, now they offered to me the distribution rights for North America. Even though it is certainly not my dream scenario, I do consider this offer.

Richard CSO Sales Process | Operational Optimization

March 28th, 2015

Negotiate an equity interest based on your perfromance (Sales or Revenue or Profits, etc). If you do not perform... the current owners are not obligated to transfering ownership to you as an equity partner. They should want you more motivated to perform with an equity clause (+ it's a way for the current owners to keep a good performer when you perform) and you can sell your motivation to perform for equity. No harm, no foul. Both parties should be open to this arrangement.

Roman Zrazhevskiy

March 28th, 2015

It's difficult to give advice without more information. What's the product? How do they plan on distributing it? Is there any commitment from buyers before this hardware/software package goes into production? -- Roman Zrazhevskiy

Carl Lawson

March 28th, 2015

"Hardware/software" product sounds like it could be wearable tech or an automotive enhancement or ? (and 'Asia' in this case is probably China). In any case, I don't think the addition of the third founder would preclude them from adding you as a fourth, unless you have issues in working with the person they've added. Basically, if they're welcoming you to the party, you could also invest and focus on North America as a co-founder.