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by bigtoga
6626 days ago
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| my stake will be protected from dilution at all stages. So you are being given preferred stock? That's the only stock that I can think of that would prevent dilution during later stages. I find it difficult to believe that a smart startup company that would give out preferred stock to employees. I also can't imagine VCs/angels who would invest in a company that had just given preferred stock to a "Legal and compliance director" (no offense but that title isn't necessarily thought of in terms of bringing revenue in as highly as a developer or salesperson). A 2% stake could easily get chopped down to 1% or .5% on liquidation due to various means. Assuming a five year growth-to-liquidation, does 1% of a $100m sale ($1m) justify taking no salary for 2-3 years and then a below-marketing salary for the remaining time? Balance that with the risk that the startup may fail, not raise as much money as they thought, etc... A least two key factors you need to think about are (1) what you expect the company to get acquired for, and (2) when you expect to be acquired. A $10m sale in year 1 means you get $50k-$100k (being optimistic) for one year of work. A $10m sale in year 3 means you get $50-$100k for three years. |
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We're still in early discussions. No it wouldn't be preferred stock, just ordinary. They seem to be proposing that a shareholders agreement will contract for my stake to be protected, but, as you know, a VC will restructure all the shareholders if it wants to, so that doesn't work.
My calculations are based around a sale value of around £50million to £90million in about 5 years which at 2% would make my stake worth £1million in 5 years time (if £50mill sale price) but that assumes I don't get diluted below 2% etc and that is why I think it is a too low % stake for me to accept since it would only give me double the salary I could otherwise earn over the same period.