[tptacek]

So don't use a dollar-for-dollar IOU. You can pay interest.

What you're trying to avoid is bringing company valuation into totally mundane cash flow problems like "who pays for plane tickets to first customer meeting".

It's a sign of very bad founding team cohesion when the founders look at each other as negotiating adversaries. Founders should prefer solutions that have a quick and intuitive sense of fairness over technical solutions that attempt to ensure fairness.

[pan69]

Honest question, what happens to IOU's when the company fails? E.g. in the described scenario, one founder takes a salary and the other takes IOU's (+ 5% interest). The founder with the salary took less risk but still received 50% of the shares (even though they are worth zero when the company failed).

[tptacek]

They're zeroed out.

[YokoZar]

Perhaps more specifically, in a liquidation the IOU-holder is a creditor in line behind others (but ahead of common stock-holder)