Just a review I did on a book that has five stars on Amazon and a foreword by Guy Kawasaki, but is really bad. Instead of startup-relevant insights about an extremely interesting topic, just badness.
I don't see contact information for you in your profile, so I'm going to write here. Would you be willing to summarize the book for Squeezed Books, at http://www.squeezedbooks.com ?
1. Your valuation is correct and considering you only have an idea, its pretty darn good.
2. The 2.5% of profits would come after the salaries. Salaries aren't profits. That said, you can't just pay all your profits out to you in salary. You will need to set that up ahead of time with his / her input.
3. Lastly, just from an outsider perspective, your buyback clause comment makes it sound like you are being a bit greedy. You have an individual who you call your friend and who is giving you a good valuation and you are
a) concerned about 2.5% share of the profits s/he will get (relative to your collective 97.5%)
b) Trying to pull the shares out from under him whenever you like.
An investment is a partnership and it is, to say the least, bad karma to screw over a partner. He is risking his money for the upside. An upside comes at an acquisition or an IPO not a buyback from the founders.
If you don't want to give up equity, don't take money. If you need money, equity is what you trade. This will likely not be the last time you make this trade, so start getting comfortable with it. Still, it sounds like maybe you will be happier with all 100%.
I'm sure there'd be some really good responses, but most of us are probably about as far from average internet users as it gets. It really depends on what the product is though.
No. They will not do that. No good VC would not force you to take a high salary if you would rather the money went into the business. They'd probably even like that. A founder should be setting the vision and culture of the company. Compensation is one piece of that culture. You set a precedent by taking a big salary and you set a message by taking a small one (i.e. Jet Blue - CEO, COO, CFO each have a base salary of $200,000 / turned down bonuses during bad years).
It's not a question of forcing. It's the norm. All other things being equal, why should someone take a lower salary?
And there are other factors. If your compensation becomes a benchmark for the rest of the team, now your company is in real trouble. You can't expect to hire key team members at less than the norm. It just won't happen. VCs know that.
Also, a VC's main job is to put out as much of their committed capital as possible into good deals. Allocating a large part of a preferred equity tranche to fund the maintenance and creation of a solid team is the right thing to do.
1. I tend to be listening to music when I am browsing the web, so it was kind of disruptive to have the playlists of others automatically load when I was looking at them. Might be better if they were stopped initially and I could choose ones I might want to hear.
2. Id probably like to do / see a little more before I registered. I don't like to just register for any site I stumble upon. I like to get a sense of what I am getting into first. The more I can do, the more likely I will register.
Well, it isn't really all that satisfying, but I've taken to tutoring, specifically SAT tutoring. This has good points ($40-$50 / hour, not very difficult) and it has bad points (relatively mindless, highly repetitive, can be a lot of driving). Still, it is a flexible solution to a very stressful problem.
