rjett

We have VCs interested in doing a round of investment in our company. My co-founder still holds on to a sizable chunk of equity, but in the last two years has become of less importance to the company. One of the stipulations for investment is a restructuring of the existing cap table to make sure the right people are incentivized going forward. Since my partner and I (the other two cofounders) have all of our worth tied up in the company, we have no means to buy out our third partners, so the restructure would have to take place via the VC deal. In theory, everyone participating in the deal is on board with this idea. In practicality, I'm having a hard time finding precedent. For anyone who has experience in M&A, what's the best way to accomplish this goal?

I own a brick and mortar business I started w 2 friends over a year ago. One partner and I put up equal amts of money to capitalize the business. I run operations and did all the legwork involved to start the business. The partner who put up money w me had limited involvement at the outset and has less involvement at present, since he has a career elsewhere. Partner 3 runs operations w me and was compensated w a small amt of equity.

We broke even in yr 1 and are on track to make a profit this year. We've done a great job of branding, PR, and customer service which huge in a brick and mortar business.

Recently, an investment group approached us. Investment is an attractive option bc it would allow us to corner the market in our city and expand outside of it at a faster rate. Growing "organically" w/o the help of investment is less attractive bc it is a linear process and the time horizon for expanding is further, running the risk of competition crowding us out of an already crowded market.

The group has proposed that they would buy the non-operating partner out of his shares and then capitalize us from there. This partner understands the attractiveness of investment and he also understands the potential stability and opportunity it would give me and my operating partner, but he's also expressed that he didn't invest in us to make a nominal sum of money a year later (even if it is 2-3x what he put in). Question 1, what is an equitable way to handle this situation?

Also, I have a realistic number of what our company is worth today, but I fear that if our non-operating partner were given his "fair share" for the company from that number and then we were flooded with the investment that the group is talking about, my other partner and I would be diluted to <5% collectively (barring any additional guarantees). If that were to happen, I would be fearful of losing control of the company. What sort of guarantees should we ask for? Red flags to look for?

I just got an email from "info@ycombinator.com" giving me a new password with no other explanation. What's this all about?