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.
6 karma · joined March 31, 2007
http://www.orrick.com/practices/corporate/emergingCompanies/index.asp
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%.
All that said, get a lawyer.
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.
Hope this helps.