Big News: FounderDating is joining OneVest to build the largest community for entrepreneurs. Details here
Latest Notifications
You have no recent recommendations.
Name
Title
 
MiniBio
FOLLOW
Title
 Followers
FOLLOW TOPIC

Question goes here

1,300 Followers

  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur

How do I structure payment, profit sharing, and/or equity for new venture?

I'm consulting on a new venture. I'm willing to defer my standard fees for the first few 4-6 months until the founder can afford to pay. After that we're trying to figure out the best way to receive some form of ongoing payment but also receive some revenue share or equity based on my investment.

For example, if I provide $50K worth of work and in 6 months the founder pays me $20K, then my other $30K will then be considered an investment in the company. But in 6 months the company may be worth X times more, so that $30K should be worth X times more. I also see that the risk I'm taking in taking a deferred payment of the $20K should be included in the investment.

What's the best way to structure and value those investments?

1 Reply

Mike Moyer
2
0
Mike Moyer Entrepreneur • Advisor
Managing Director at Lake Shark Ventures, LLC
Do this:

Tell your client that as a consultant your fees would be subject to a buyout schedule as follows:

Send invoices monthly. If they pay your invoice, no problem. Each month that goes by they would pay an increase according to the schedule above.

This gives them the ability to pay you back without giving you equity, but recognizes the high risk you are accepting.

At the end of the year whatever is left over will be treated as a convertible note towards equity. The buyout option would expire. For instance, if you billed them $50K in August and they never paid you, you would get a $100K convertible note in September the following year.

The same rules would apply if your client is using the Slicing Pie model, but at the end of the year you would get slices in the pie instead of a convertible note.
Join FounderDating to participate in the discussion
Nothing gets posted to LinkedIn and your information will not be shared.

Just a few more details please.

DO: Start a discussion, share a resource, or ask a question related to entrepreneurship.
DON'T: Post about prohibited topics such as recruiting, cofounder wanted, check out my product
or feedback on the FD site (you can send this to us directly info@founderdating.com).
See the Community Code of Conduct for more details.

Title

Give your question or discussion topic a great title, make it catchy and succinct.

Details

Make sure what you're about to say is specific and relevant - you'll get better responses.

Topics

Tag your discussion so you get more relevant responses.

Question goes here

1,300 Followers

  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
Know someone who should answer this question? Enter their email below
Stay current and follow these discussion topics?