Thank you, that’s very valuable

I am really not trying to be sneaky. We told Them they can add whatever clause they like regarding preference. They only added on liquidation, we copy pasted what they requested into the SHA. They did not engage our lawyers for preferences shares, they only requested preferred shares.

We’ll know, we are not. The investor is effectively investing the remainder of the money into the parent company and share in a much lower risk execution.

sure you include this possibility (and others, including major change of ownership, merger, bankruptcy, etc.) in your agreement. Could’ve easily screwed us and our investors if the CEO was not such a person of integrity.

thanks we are ensuring we are covered under all eventualities there (we are getting advice from expert in this area). The benefit of having the investors on the earnout is they are incentivised to bring in expertise on this.

ou have the cash and the product, then you owe it to your existing investors to try to fulfil the story you sold them, or get a better valuation such that the investor B gets back at least 1MM plus the risk-free return rate in your area (~1.04MM). The earn-out is a bonus and should not be factored in for this.

Its more this buyer has a massive customer base that we can sell our product to, they have an adjacent product, adding ours into the mix is a win win for them. They can use it to upsell to existing customers, ontop of their existing product, and even bundle it into new customers to win deals against competitors. It makes their platform play real.

We have other alternatives, but the earnout seems like a real possibility to hit serious numbers given what we know right now. It feels like it derisks us while removing the major execution risks (They are bigger, have the things and expertise we need to execute well). The buyer is also in a place where upselling our product to their existing customer base is also a massive win for them. We are tied to the ARR, and are aligned with investors regardless we will get the earnout terms pretty nailed down.

Ha! Yeah I get you, I think we unlikely to hit the arr numbers for a 10x return for investors but they will definitely hit a min of 2x on the earnout is my feeling on it

Im a CTO and Cofounder, im probably more of a COO though, responsible also for the CTO responsibilities.

I’m involved in absolutely everything and its extremely difficult balancing it all.

​

A key take away from my current startup is ensuring your founding team has the right people to fill the most important leadership positions and the experience to build teams around them.