mikeyparker started this topic @ 16:04 on 20/11/2007
Hi all, I have a query. A friend and sometime business associate connected us with a potential investor for a startup we are working on. This person has then asked the question about remuneration which they are hoping for as shares in the new venture. Now even though they have asked for a nominal share (not confirmed but I am assuming by that they mean 1-2%) how should I proceed on this matter. The introduction definitely has a value to us but I do not personally see this as something they should receive a direct reward for, more so I look upon it as, you've helped us at this juncture and when ever the opportunity arises I will do the same for you.
Does anybody else have experience/ thoughts on this that they'd care to share?
Perhaps this may also help with that; we do on a sort of adhoc, but agreed basis reward them with a percentage of deals that they bring to our other business that convert to paying contracts.
Thanks Mike
RE: Introduction Payments?
julesbrad | 20/11/2007 07:29 PM
I don't see the problem with them having a nominal share in the business. I assume that you are a private limited company and someone having 1-2% of the shares does not mean that they can take over the business from you. If the business is a success then they will receive some dividends (the level of which you will decide anyway) but as you say, the introduction definitely di have value to you.
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RE: Introduction Payments?
mikeyparker | 20/11/2007 09:30 PM
Hi Jules. My concern was never over control of the business as effectively any shares in this case would be of the sort that you effectively can't do anything with - not sure on the details of share types but my accountant has explained this before and there are differing types. My issue was more so of the order that this business will likely require more than the initial funding stage and from my readings and speaking with others, it is often the case that each round dilutes the owners shares with the end result being that by the time the business is taken to the markets or sold then the founders typically only hold about 10% of the shares. So that being the case and it being my idea and my hard-work and risk over this time then to give away 1-2% so cheaply (the introduction was simply a case of I know these 2 guys you should meet them) seems a little hard. Again not sure on this it just feels a little wrong to give such a high reward for such little input.
On the other hand my feelings may be wrong and I've just based it on what I would do in the same situation, i.e. thats just what you do in life and you don't always expect to be rewarded for every helping hand you give someone - do enough of the right things and you'll get your rewards in other ways.
RE: Introduction Payments?
julesbrad | 20/11/2007 09:40 PM
Have a word with your accountant about making it so that for future funding, if your holding is reduced, for example, 25% then the introducers percentage is also reduced by 25% - they will still have a holding, slightly reduced as your holding would be, but the reduced holding would be of a bigger business.
If you holding is reduced from 80% to 20%
then your introducers holding would be reduced from 2% to 0.5%
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