Anyone ever negotiated equity before?

Philip J. Fry

Philip J. Fry

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I got approved for equity at a partnership. We haven’t determined a percentage yet. Right now, SE revenue is 30% of the company; so, I’m pretty sure I won’t get more than 30% of the company. The rest mostly comes from PPC. The partner who I report to won’t show me the AdWords account but I’m pretty sure that SE income ends up being a lot of the company’s retained earnings. He also hasn’t shared with me his % or the other guy’s %.

Do you have any advice on this? Let me know and maybe we can chat over Skype or something.

My course of action right now is: 1.) speak to my attorney next week to see if he can help 2.) talk to a CPA and see if he/she can help 3.) Ask for the company’s balance sheet and income statement.
 
The fact they won't show you the Adwords account should raise serious red flags, and it should be a further red flag that they are keeping there own percentages secret, while their may be legitimate reasons not to tell you, IMHO if they where genuinely interested in offering a mutually beneficial deal then they would tell you.

I assume from your post that your doing the SEO, and the other guy is doing PPC, are you getting salary for this? Is this a product you could copy and run with or offer your services to a different company who might be honest and upfront? Alternatively Instead of equity might a bonus be better?

I mean you should not really need to speak to a lawyer at this stage if they where honest and upfront, i know theirs allot you haven't said obviously, but honestly be careful, their is ways at least in the UK, that you can be grey area'd out of equity.
 
Wow. I should clarify:
  1. I've been doing business with them for over a year now. So, its not like this is someone I'm meeting for the first time.
  2. I'm pretty sure they withheld the AdWords account from be because I was asking for a raise at that time. Business owners typically state "the company's doing poorly" or "we're a small business" to get employees to accept lower pay. Shit, I know a guy who has a $12 million/year e-comm business who still claims its a "family business" just to get lower bids. I also am pretty sure he doesn't know that my pay has to be at-arm's length; this will give my pay upper and lower bounds. If he knows that, I'm pretty sure he'll be reasonable -- he might just be scared that I want a super high salary.
  3. No matter what, I'm going to meet with my attorney and a CPA. They'll have to go through the books and proof read the contract anyways.
  4. I actually haven't asked them directly "whats the current equity split?" and "How much does the company make?" The stuff from the OP was what I obtained while doing other tasks.
So, yeah, I'm gonna meet with my attorney next week. I also know a guy who has equity, maybe he can help.

Anyone else here got equity in a startup?
 
You need current cap table
All shareholder agreements etc
All financials
All other major contracts the company has entered into
 
Philip J. Fry said:
@NickEubanks how did your experience getting equity went?
Click to expand...
@Darth hit the nail on the head.. you need to know cap table and current financials or you're flying completely blind. In addition you need to know what your terms are; what's the vesting period, what's the cliff, are they options or phantom stock (i.e. will you be getting a K1), and you also need to consider the current value of the equity as it's used to adjust downward you current earning potential for the promise of investing your time with the company for larger future earnings.

IME it's gone a whole bunch of ways, including terribly wrong a few times. In my current ventures I hold onto as much equity as I can in any product-focused venture (payouts / multiples / earn-outs will always be higher here than with service-based businesses) but you need to get your head wrapped around the equities current value so you can treat the consideration as an asset.
 
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