A founder gave away too much equity in the early rounds and will become a minority holder in the company before series A. How can this be tackled?

The answer certainly depends on where you want to go from here.

As others have indicated, it’s typical that a founder owns less than 50% of the company, but it sounds like you may be in a pretty tight spot due to the amount of equity you gave away.

At this point, you have a couple of options.

  • You could let the company sink. Business is complicated and there are many solid business owners who had to go learn the hard way the first time. In the future, you could focus on creating better equity distribution and consider the long-term impacts of how equity impacts business.

or

  • 2. Renegotiate terms so that equity is distributed differently. This can come in the form of trying to work with existing investors, searching for new investors to buy out the old investors, or establishing new terms in the vested capital so that you can start earning an income.

At any rate, you should seek the advice of a seasoned business attorney. Negotiations that change agreed upon terms can be complicated and stressful. If terms are decided, you will need to draft up new agreements that reflect those changes. You can’t afford for any missteps at this point.

LawTrades would be happy to connect you with a quality business attorney. We work with freelance attorneys who are highly skilled and expertly trained to handle even the most complex cases. Because or lawyers work for themselves, their rates are affordable and their payment plans are flexible. Contact us today for more information.

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