Is this a good deal for my company? What does this offer mean?

by Michael-Traction. Posted on Sep 12, 2020    1    4


Recently, an investor offered me the following terms. As a new entrepreneur, I'm trying to understand what these terms mean and what's really being offered to me. Any insight, especially on point 3, 4, and 5, would be really appreciated!

>Based on our many discussions , particularly where your company in the venture cycle, I felt that any interest in the company through its growth phase and exit strategy currently required a role more than just as an investor; your company requires operational and financial management talent in order for this investment to have value for an exit in due course.  As I have said to you before, I have no interest in the  production and creative control, however, I did express my concerns about the risks of the entity being very new and significant exposures in many areas.  That requires someone who can manage the financial and operational aspects whether I am part of it or you employing someone else.
>
>Here are some of the elements I would like to see come to fruition for me to play a bigger role in your company:
>
>1. 10% interest capital investment in the company;
>
>2.  A 10% interest in the company, vested over several years (to be discussed at a later date)
>
>3.  A 20% capital profits interest in the company upon the sale of the company based on the cost of today’s valuation
>
>4.  Purchase of interest for each round of financing at a discount of 85%
>
>5.  Lastly, which we had not discussed at the time of our meeting was standard things such as tag along drag along, and other things which we can discuss should we come to a decision as to whether to move forward.

  Thanks!!


Comments

QuantumD 4

Hi -

Become a lawyer.

Medicore, Chang

anonymoose137 4

Hi -

Become the law.

Average, Chang

CobraCurn 4

Hi,

Don't hire a lawyer


Worst, chang

Chang_Throwaway 5

Hi -

Hire a startup lawyer.

Best,
Chang