Cutting up the Cake Before You've Baked it.
This is one funny story because it's so true. And because it can almost happen to anyone. If you let it. Or it happens. Or almost. etc. Life is a sequence of line-ball plays and depends on that fusion of skill and luck.
Suffice to say, the one thing you want to do at point zero of a venture (and the 2 years after it when u bootstrap pre finance) is to dole out equity to smart friends, employees and specialist core contractors.
But it can lead you to the mess highlighted below where 0% or 100% of $0 is ZERO. I ain't doing no zero play this time. But the best want equity not bank cash. Well they want the bank cash too. "Make it ordinary shares, topped up with some series A, options and some 6 figure cash plssss."
Post Money Value : "VC lawyers offer up the shareholders agreement as one of the documents that needs to get signed off by all the shareholders. No problem. Well, almost no problem. Turns out that when the friends and family round was being done, lots of shares were handed out to lots of people for help. A little code help? Here, have some shares. Dropping a pizza by? Here, have some shares. Some cash? Bless you, here, have some shares. You get the point. All told, 42 shareholders which owned 22% of the company. 42 people spread out over three countries. 42 signatures required. And, as fate would have it 21 missing shareholders. Moved, not returning phone calls, no emails, etc. The VC refused to close without the signatures and, to make a long (painful) story short, the company died for lack of funding... The point I'm making here, folks, is don't go to the office supply store and buy those fill in the blank shareholder agreements and stock certificates. Make sure when you start, you start with the structure that will allow you to take professional money sometime in the future. "
Suffice to say, the one thing you want to do at point zero of a venture (and the 2 years after it when u bootstrap pre finance) is to dole out equity to smart friends, employees and specialist core contractors.
But it can lead you to the mess highlighted below where 0% or 100% of $0 is ZERO. I ain't doing no zero play this time. But the best want equity not bank cash. Well they want the bank cash too. "Make it ordinary shares, topped up with some series A, options and some 6 figure cash plssss."
Post Money Value : "VC lawyers offer up the shareholders agreement as one of the documents that needs to get signed off by all the shareholders. No problem. Well, almost no problem. Turns out that when the friends and family round was being done, lots of shares were handed out to lots of people for help. A little code help? Here, have some shares. Dropping a pizza by? Here, have some shares. Some cash? Bless you, here, have some shares. You get the point. All told, 42 shareholders which owned 22% of the company. 42 people spread out over three countries. 42 signatures required. And, as fate would have it 21 missing shareholders. Moved, not returning phone calls, no emails, etc. The VC refused to close without the signatures and, to make a long (painful) story short, the company died for lack of funding... The point I'm making here, folks, is don't go to the office supply store and buy those fill in the blank shareholder agreements and stock certificates. Make sure when you start, you start with the structure that will allow you to take professional money sometime in the future. "
posted by redbarren at 5:27 PM
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