Startup Funding

Majority owner of startup corp, co owes me 1.3M & co has 61 shareholders, best way to restructure co for fundraising.


January 6th, 2020

Startup restart, r&d to manufacturing, energy storage

Paul Garcia marketing exec & business advisor

January 11th, 2020

Investors can't owe you money. If they have not given over the money in trade, they are not yet part owners. There's no credit when it comes to investors. Would you go into a bank and get a loan and start making payments before they gave you the money? This mismanagement will be revealed in any diligence for future fundraising and could seriously affect interest. Get your house in order, get your attorney involved, and get your money in-hand or cancel the stake offered in exchange for that money that hasn't been delivered. The number of shareholders is mostly irrelevant. It's all in the contract language, this much money for this much ownership stake.

David M

January 10th, 2020

Its not a startup if it has 61 shareholders, or it is the most poorly run start up in the history of startups.

Edward de Jong Software designer and developer, programming language designer

Last updated on January 22nd, 2020

In the state of California, it is actually against the labor code for employees to loan money to their employer. Deferred salaries are highly frowned upon. And since salary is not tax-advantaged you will never see this in Silicon Valley. Instead you see stock options, where you get a chunk stock based on some milestone or achievement. Anyway people collect a lot of shareholders at the beginning when they are scrounging for money. Most of these early investors get screwed royally, because of dilution which causes their stake to become tiny. So what if you own 10,000 shares, if the company has issued 3 trillion... Anyway debt is in general an anathema to investors, because they want you to do something with the money, not just pay back someone else's bad debt.

In a situation like this, the typical reset approach is to dissolve the previous company, maybe as a concession to prior shareholders throw them some stock just to keep them from suing you. But the typical VC in the valley will just have the assets sold at a bankruptcy auction which makes it very hard to attack later. Note that nobody will ever care if the whole thing fails, but when you succeed, all the sleazy dealings done in the beginning come back to haunt you. So the best policy is to be very strictly fair to all people, and not play favorites.