How can I protect my future position in a startup?
I took part alone in a 4 months acceleration program for startups, during which I worked on the idea, I did market and customer research and all the usual things needed before start a new company. At the end of the program I opened a Private Ltd company and paid a web agency to get a prototype.
Overall I distributed 15% of the company to Legal advisor, scientific advisor and acceleration program organizer.
At this stage I needed an operative team for daily needs (development, marketing) and I found 3 guys who run another startup very similar to mine but with different customers.
They proposed to help me bring my startup on the market in exchange of 35% of my company.
I'm happy because their are experienced and can really help me but once the startup will be on the market they let to me the daily managemnet.
And doing that I will own only the 50% of shares.
Since we will need investors come into the company my percentage will fall to less then 50%.
I'm ok with sharing important decisions with the others but I want secure my leadership position for the future. I don't like the idea to manage daily the company but with the possibility to be ousted at any time by the 51% of shareholders.
Can I add a clause where it says explicitly that I am the chairman and that I can ousted from the governance of the company only by the 100% of shareholders ( excluding myself)? I think this will protect me better.
What do you think about it? any other solutions? Thanks to you all
Getting Started Co-Founder Equity Founders Agreement
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I doubt any investor will agree to what you're suggesting. If you want to retain control, you need to retain a majority vote of the decision making bodies (shareholder meetings and/or board of director). Looking at the equity stakes you mentioned, it seems to me that you've ALREADY given the company away; it's just my opinion, I could be wrong but 35% for a distribution agreement is crazy sky-high IMO. I hope what you agreed is at least vested.... Take a look here, might help: http://www.brightjourney.com/q/losing-controlling-interest-company-bad – Frenchie 11 years ago
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Thank you Frenchie. That is not a distribution Agreement. Infact they will be co-founders but not full time. Probably I'm making things too complicated. I only want to have more protection like chairman of the company. For example I already have one, if the majority of shareholders takes my post of Director, my company have to pay 100.000$ to the company who organized the acceleration program. – Andrea 11 years ago
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Can you give them non-voting stock? – Clay Nichols 11 years ago
2 Answers
35% for development/marketing seems a bit much. I think you should start there when thinking about retaining a controlling interest in the company.
I would have posted this as a comment but I do not yet have the ability to post comments.
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There you go, @moonstar2001. I believe you now have enough reputation to leave a comment instead. – rbwhitaker 11 years ago
Anyone who knows they will need significant capital input has to deal with the reality that at some point, you may not be the right person for the role you have at the outset.
So you have a choice. Either be prepared to take a small slice of a large pie, or take as little investment as you can in order to retain 51% or more indefinitely.
Short-term, you should get advice on the immediate step. I find it hard to imagine that you should dilute yourself to 50% so early unless you really are solid with the new co-founders.
You might want to invest a few minutes listening to Seth Godin's experience, tips and insights in this podcast on raising money.
