ALOHA

I started a wearable company and have brought on three other people: CEO, CTO, CHO, & CMO. We have the design and patent. We were selected for an accelerator.

Now I want to bring on a CFO. Is it ethical or even legal to accept a nominal fee of $17.5k to allow a CFO to join us?

  • tossed_@alien.topBEnglish
    1·
    10 months ago

    Some things aren’t adding up here. Why would anyone give you money to join your startup? Why would you raise funds from employees before raising from outside investors?

    Imagine one of these employee-investors left your company after a few years, then you’d be stuck with an uninvolved investor with an outsized share of your firm’s equity. Or if you need to raise capital in a year from now, imagine what investors’ response will be to the fact that your cap table is already a mess before your first round?

    Forget about legal or ethical, it’s just dumb. Raise capital from wealthy investors so you can get more capital for less equity. Pay employees with cash so you can give them less equity. Save the equity for yourself or for a future round of funding instead of selling it for cheap to C-suite executives. (And you will have 5 managing how many employees?? You really need a full executive suite right now, before you’ve even joined an accelerator?)

    • DimensionCharming808@alien.topOPBEnglish
      1·
      10 months ago

      SO the next equal share might be around $150k if there is even a share available.

      I have heard of positions on a board of directors sell in the millions.

      I already signed a promissory note to fund the company with ten million dollars.

      • tossed_@alien.topBEnglish
        1·
        10 months ago

        If you have $10M in funding why are you collecting a minuscule $17.5K from a single employee or advisor? Literally not even worth thinking about. Conserve your equity and remove these barriers for experienced members to join your team.

          • tossed_@alien.topBEnglish
            1·
            10 months ago

            So basically, the long term success of the company is not at all a concern here? Who cares how much SHOP PAY can accept? This is sounding more and more like a straight-up scam.

      • tossed_@alien.topBEnglish
        1·
        10 months ago

        “Equal share” what do you mean by this? Is your business a limited liability partnership? If not, then you should sell/give as little equity as possible to your executives and drop this “equal share” thinking.

        I have heard of positions on a board of directors sell in the millions

        Maybe if your firm is established and reputable. Sounds like your firm is neither. You should avoid this business of selling board positions for startups because it’s not really profitable nor does it attract better managers. Find board members who can offer connections, access to more capital, a relevant professional network. If they are valuable in these respects, YOU will be paying THEM in both cash and equity.