
Investors getting return on Capital prior to exit? - startupken
Hi all,<p>I am negotiating with some investors who are expecting to invest $1M. They want a return of their capital contribution of $1M through distributions within 3 years and they also want the negotiated equity. Upon reflection this seems extremely non-standard to me. Would love someone else’s thoughts.
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matt_the_bass
I've seen similar before. It's legal. They are welcome to propose anything
that's legal. You're welcome to not accept their terms.

It really comes down to how much leverage you have. Do you have other
investors?

If their equity percentage is low, then you could almost think of it as a loan
with interest paid in equity. If it's high, you might think their terms are
not reasonable.

Good luck!

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nnn1234
As others have said, this deal is not standard.If you have other options go
for them. If you want to stay at the table here is a counter for 1M investment
negotiated equity 3 yr term every time they get a distribution, their equity
goes down by a similar % such that at the end of three years they dont have
any equity.

or just negotiate a better deal.

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troydavis
While there’s absolutely nothing wrong with that offer, for startups, it’s as
non-standard as you think. They’re looking for a different type of investment
than your company would provide.

For other readers who have revenue and want a hybrid of debt and equity, look
at Indie.vc and Lighter Capital.

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cjbprime
It sounds like they have confused themselves into thinking that they are
providing you a loan.

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NonEUCitizen
Tell them you're not looking for a payday loan, then stop talking to them and
look for real investors.

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icedchai
Sure, as if it was that simple. He probably has no other alternatives, which
is why he wound up with these terms.

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startupken
No deal at all is always better than a terrible one. We walked away today.

