Re:Ask HN: Potential investor wants to partner for equity
by RichardDL on Wednesday May 15, 2024 @09:27AM
(#40366651)
I especially like the point number 4. A lot of our plan would be hinging on him. And if things go wrong, it would be super painful and difficult to recover.
He wants to be a lead investor too. He just wants to be more than just an angel investor and help us. So we are thinking of taking some of the investment for X% and then suggesting a vesting schedule based on ARR. Like the e1g said in the comment below. 2% for every 100k ARR up to 10%
1. No deal is too good to walk away from. As soon as I smelled something, I should've said, "Thanks but no thanks."
2. You run a straight Delaware C corporation, not an LLC. If there's preferred stock the investor gets none of it. Use a boilerplate vesting schedule that lets you cut the investor loose if they turn toxic.
3. You retain access to the corporate checkbook. If investor balks, run away from the deal screaming.
4. If your investor has a change of heart (or health event, or divorce, or drug problem) in the next 9 months, it will be harder to raise money without his full buy-in than without his involvement at all. "Why isn't so-and-so putting in any of his money for this next round?"