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Need opinions: equity, salaries and risk in a startup
Awasaba
subscriber Posts: 1
Hi all,
let me give you a brief run down of my case: a couple of other people and I are thinking about creating a technology startup for a niche marketing product. It would involve an initial ~8 month period of research and development which would cost ~$70k, after which we could begin to actually start selling and (hopefully) see income. These other 2 potential partners have the tech know-how required for this project, and I know them to be skilled and capable people in their fields, while I have the running-a-business know-how (I'm a business major).
However I don't like the initial investment proposition they made to me: They want to split shares ~52% for me and 24% for each of them, but since they have no cash to invest they propose I put up the entirety of the R&D investment required in the form of an investor's loan to the company, which would be accruing an yet-to-be-determined-but-fair interest rate until there was income that the company could use to pay me back the loan. Additionally they would both dedicate themselves as technical directors during the R&D phase as a part time job (~4 hours per day each), and would pay themselves wages for this during the ~8 month period. After the R&D period is over, the wages would end, although they'd continue working in the company.
So obviously I don't feel comfortable assuming all the risk (because if the company goes tits-up, there would be little assets left to liquidate) yet getting only half the shares , although I am not opposed to having them paid fair market wages for their work during the duration of the R&D period, given that admittedly I will be doing little during that phase. I'm having my own ideas about a counter offer, and I do want them to have participation in shares in some form because they're needed for the long haul and shares provide a great incentive to give 110%, but I want to hear opinions on what others here would think is fair or workable. Suggestions please?
let me give you a brief run down of my case: a couple of other people and I are thinking about creating a technology startup for a niche marketing product. It would involve an initial ~8 month period of research and development which would cost ~$70k, after which we could begin to actually start selling and (hopefully) see income. These other 2 potential partners have the tech know-how required for this project, and I know them to be skilled and capable people in their fields, while I have the running-a-business know-how (I'm a business major).
However I don't like the initial investment proposition they made to me: They want to split shares ~52% for me and 24% for each of them, but since they have no cash to invest they propose I put up the entirety of the R&D investment required in the form of an investor's loan to the company, which would be accruing an yet-to-be-determined-but-fair interest rate until there was income that the company could use to pay me back the loan. Additionally they would both dedicate themselves as technical directors during the R&D phase as a part time job (~4 hours per day each), and would pay themselves wages for this during the ~8 month period. After the R&D period is over, the wages would end, although they'd continue working in the company.
So obviously I don't feel comfortable assuming all the risk (because if the company goes tits-up, there would be little assets left to liquidate) yet getting only half the shares , although I am not opposed to having them paid fair market wages for their work during the duration of the R&D period, given that admittedly I will be doing little during that phase. I'm having my own ideas about a counter offer, and I do want them to have participation in shares in some form because they're needed for the long haul and shares provide a great incentive to give 110%, but I want to hear opinions on what others here would think is fair or workable. Suggestions please?
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