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  • The worst investment terms you’ve ever seen?

    updated 2 years, 7 months ago 0 Member · 1 Post
  • Jessica

    Member
    February 12, 2020 at 4:07 pm

    I received our first cap table today. And boy oh boy is this a bad offer… 7M USD for 25% of the company; but the guy brokering the deal on behalf of his friends wants an additional 15% (8% warrant excerisable in 1-4 years; 7% freebie on close of first 2M USD) AND get paid approx $1.5M in advisory fees over the next 2 years. Oh, and he’s loaning me the 250k in order to pass his buddies’ due diligence because we can’t afford 70 grand for a huge law firm to do it. Some additional shitty points: -If the guy transfers his warrant he wants us to pay taxes for it -That 7% freebie on close is on issued and outstanding shares so if I have 400 shares outstanding and only 100 issued; he’d get 24 shares not 7. -Investor’s 25% can’t be diluted past a certain point until the Series B round so they effectively get 285 when all is said and done. At the end of the day I’m pretty much giving almost half my company for 5M USD and I’ve got to ask my lawyers to take a piss. Anybody else get sharky offers like this? It’s structured like a freaking mezzanine deal but I’m a cutting edge tech startup that could literally turn my billion dollar competitors business model to ashes. I wanna hear the worst offers. Maybe someone has got me beat? – by /hq/Atomic1221 – –

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