Comments on: Recouping equity after giving too much away in the early stages… https://startupsanonymous.com/question/recouping-equity-giving-much-away-early-stages/ A place for startups to share stories and ask questions anonymously Sun, 11 Feb 2024 13:55:42 +0000 hourly 1 https://wordpress.org/?v=6.5.2 By: where to buy dmt in colorado https://startupsanonymous.com/question/recouping-equity-giving-much-away-early-stages/#comments/52761 Sun, 11 Feb 2024 13:55:42 +0000 https://startupsanonymous.com/?p=1765#comment-52761 … [Trackback]

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By: Anonymous https://startupsanonymous.com/question/recouping-equity-giving-much-away-early-stages/#comments/8198 Thu, 15 Jan 2015 11:05:17 +0000 https://startupsanonymous.com/?p=1765#comment-8198 In reply to Anonymous.

+1. Clawing back equity without joining a funding round is precisely equivalent to getting money for free.

12% preferred is also too vague: is this preferred stock or preferred participation? There’s a huge difference and this potentially affects angel investors very heavily.

The lack of an option pool is also interesting – I would wonder just how sophisticated this angel group is if said option pool wasn’t carved out to start with. Doing so now means a straight out dilution on top of what already is there from angel/seed and series A.

It is certainly possible to award from this option pool, but unless you’re going to suck it dry personally, it is just about mathematically impossible to offset the dilution from the option pool by drawing from the option pool directly, and either way this will have to be approved by all/most investors.

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By: Anonymous https://startupsanonymous.com/question/recouping-equity-giving-much-away-early-stages/#comments/8189 Thu, 15 Jan 2015 03:31:18 +0000 https://startupsanonymous.com/?p=1765#comment-8189 In reply to Anonymous.

Everything’s negotiable!

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By: Anonymous https://startupsanonymous.com/question/recouping-equity-giving-much-away-early-stages/#comments/8184 Thu, 15 Jan 2015 00:21:33 +0000 https://startupsanonymous.com/?p=1765#comment-8184 I’ve definitely seen founders claw back equity based on milestones (tho rare). Just have an open conversation with your investors. If you set an audacious goal, ask them if they would reward you with additional equity.

If I were an investor, I’d see that as a positive signal. (better than founders asking for ridiculous raises & taking money out of the company)

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By: Anonymous https://startupsanonymous.com/question/recouping-equity-giving-much-away-early-stages/#comments/8149 Sun, 11 Jan 2015 17:39:28 +0000 https://startupsanonymous.com/?p=1765#comment-8149 In reply to Anonymous.

^ This.

They may be open to some sort of Equity-for-Royalties type deal, but don’t count on it.

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By: Anonymous https://startupsanonymous.com/question/recouping-equity-giving-much-away-early-stages/#comments/8148 Sun, 11 Jan 2015 17:38:38 +0000 https://startupsanonymous.com/?p=1765#comment-8148 The board could give the founders restricted stack grants. It’s something that is sometimes done when founders are diluted to very little equity and they need something to keep them incentivized but I’ve not heard of a case where founders just felt like getting more because they “deserve it”.

There is tax consequences though since it counts as income to the founders so you should talk to an accountant.

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By: Anonymous https://startupsanonymous.com/question/recouping-equity-giving-much-away-early-stages/#comments/8144 Sun, 11 Jan 2015 05:30:46 +0000 https://startupsanonymous.com/?p=1765#comment-8144 In reply to Anonymous.

+1 on this, op is just being wishful. Perhaps his investors are really naive…

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By: Anonymous https://startupsanonymous.com/question/recouping-equity-giving-much-away-early-stages/#comments/8143 Sun, 11 Jan 2015 00:43:27 +0000 https://startupsanonymous.com/?p=1765#comment-8143 Investors open to which kind of rejiggering? Giving back equity? Certainly not! If you put your own money in the company, it is welcome. It derisks investors so they are happy (see the signaling theory). But if you can’t keep control, you are cooked.

What you can do to regain equity: transform your company in a zombie startup whose unique goal is to give the highest wages possible to founders. Keep this money and after a while, invest it back in the company to gain equity. It takes years and the chances to renew with startup growth are tiny. And the chances to get funded again become zero.

In my experience, if you gave too much in early stages, it’s done. You became your investors employees and you can have a nice corporate career but you won’t control your company ever. If your goal is social position and money, it’s ok. If it is control and freedom, you should think about the future.

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