

Ask HN: Would you go for the Hail Mary? - Varcht

What would you do in the following situation?<p>Let&#x27;s say you are a significant share holder in a startup as a managing employee. The startup hac been backed by a single party since it&#x27;s inception 4 years ago. Currently the startup is running at about a 50% loss after earnings have doubled year over year for the last three.<p>Recently the backer has had it&#x27;s earnings drop and as such will no longer back the startup effective immediately. While the timing was not known this did not come as a surprise and the startup has been seeking outside investment since July and is close to setting something up, actually starting technical due diligence the day before the word from the backer to shutter came down to send the employees home while keeping the executive on for a time to tie things up.<p>We the startup executive team came up with a plan. We proposed that we would give up our salaries in exchange for 30% of the startup and that the employees would be kept on keeping the team intact  for next 2 1&#x2F;2 weeks. With the hope that significant progress is made on the new funding. Surprisingly the backer agreed.<p>Crazy or worth the gamble?<p>btw, I&#x27;m looking for someone that could look over the paperwork with me.
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fencepost
Absolutely worth the gamble if you think there's realistic potential going
forward.

It's a chance of giving up 2.5 weeks of pay to keep a 4-year company going
longer term. If it flops, you're out a couple weeks pay but hopefully can take
it, you've kept your staff on for a couple extra weeks, etc. If it succeeds,
you've delayed pay for the executives by a few weeks (it may not be lost -
much will depend on structure, etc. but if you're salaried and the startup is
independently incorporated, it may be legally obligated for those 2+ weeks of
pay), you've shown the staff that you're willing to give up your own pay to
keep them on (loyalty!), etc.

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gus_massa
* If you follow this idea, get the 30% equity in a signed written document.

* Who owns the other 70%?

* Who will pay the employees? Servers? ...

* Have a plan for the 3rd week. What would you do if the funding doesn't appear?

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Varcht
Sorry to take so long to get back, busy day.

The team already holds 10%, the backer will retain some, some offered for
investment and some reserved for future. Backer is committed to pay the
employees for a time as well as keeping the lights on for a time. In the 3rd
week if investment is eminent we would reevaluate, else I guess we tried.

