Hello friends and investors,
A quick question. I was recently asked by a friend, who is a owner of a web commerce product (ie. subscription based .com site) and also working as a consultant to support the business as well as his family. Since the scenario is similar to mine, it popped up in my mind too.
If one runs a .com website while working as a consultant to support the business operations as well as daily/family life, and now it's time to raise funds from VC/investors to enter bigger market or scale the business, how does it work if he is not ready to leave the consulting job? Important to note that business is not making money yet, so currently his job is the main source of income for his family and to bootstrap funds for business/site operation. Since the website can run and business be alive without a physical office or extra people, I dont think it is a good idea to leave the job thus losing the support from his family. If a VC asks him to leave the job and concentrate on the business as as full-time job, what about his salary to support the family? As you know if one does have a strong support for his his business endeavour, he is facing a rough and tough hurdle already and it creates a big blocking bump in front of the business to move ahead. It would be a big bugging question on his commitment to the business/investment.
So, how would he be paid or what could be expected from a VC or angel or such, as part of deal in such a case?
Any thought or suggestion would be great.
Most VC would be hesitant in investing in a company where the founders aren't fully invested. However, there are certainly cases of a promise of investment contingent upon the full-time commitment of the founder.
Usually the largest part of a business plan is the salaries for employees. And that includes the salaries for the founders. It is expected that VC money will be supporting the founders.
If one of the founders was explicitly not going to be a full time member of the new company, the investors would doubt the commitment of that person, be concerned about the viability of the investment, and so less likely to invest.
Thanks for your input. Yes, it clarifies several doubts about the initial remuneration. Agreed, when a founder says s/he is not fully devoted to the job on a full-time basis, I would doubt the founder's commitment as well.
Since it is a web-commerce product and does not need a heavy new hiring or office set-up (for time-being), it does not need much funding to keep the business afloat.
As you said varies from one to another investor, may be good idea to have an open mind to discuss further for funding while being remunerated.
Thanks a lot.