sllrpr

> hmmm, "almost" 2.5m round and $10m in revenue "booked for next year" is not that credible of a company. you are taking a lot of risk that the money does not come through.

What is the risk? Only that we end up back where we were before their offer, so far as I can see.

Their fundraising deal seems well underway, I've raised venture capital myself, and these guys know what they are doing.

> venture backed companies _consume_ cash, they usually don't throw it off (6m extra in a few years) until later.

It's a line item for them, they pass the cost directly to their customers.

They have to pay us on a quarterly basis, there are quarterly minimums.

> Just a character evaluation here, but if they are willing to cut this other company loose, I think you should evaluate how binding they consider contracts to be before you enter into one with them yourself

I'm fairly sure they don't have a contract with the other company, the time pressure is that they were about to sign an LoI with them.

> At the very least I would ask them to make a substantial (500K minimum) deposit against the balance up front. If the don't have the cash to do that, I would not deal with them as they probably shouldn't be doing acquisitions.

I'm not sure, they've been open about their financial situation and I understand why they've proposed the deal structure that they have.

> Other crazy idea: this is HUGE validation, go raise VC against this offer and make it a real business.

Problem is that I've already got other projects that would be extremely difficult for me to abandon.

> Also, if they are truly in the enterprise space and can afford to acquire companies to "solve a difficult problem for them" they should be able to pay you serious money and $2m in first 12 months should be no big deal.

Like I said, I'm familiar with their finances, and that isn't an option for them.

> Another thought, If you are really going to get in the business of giving a $6M loan over 3 years with your 3 cofounders, you should consult a lawyer about more than the LOI. The entire corporate structure needs to be designed to make sure people get paid out correctly and that taxes are accounted for.

Lawyers and accountants will all get to have their say before anything is signed.

> What is the financial condition of the acquiring company? Not being able to come up with a couple of million should be a red flag.

They have been completely open about that. They are about to close a $2.5M round, and have $10M in revenues booked for next year.

> What is the reputation of the company and its principals.

Good so far as I can tell, they seem like smart, honest guys.

> Unfortunately, there are plenty of players willing to string you along to get your product cheap, lock you out, whatever.

With this deal structure stringing us along hurts them as they have to pay more.

> Dont do anything without the advice of a lawyer.

Roger that.

No question that we will have the LoI reviewed by a lawyer before we sign.

No, it's basically they get a discount the faster they pay. 12 months it only costs them $2M (they've said this is very unlikely).

It gives them an incentive to pay me as quickly as possible.

There is no "earn"out, but we do need to provide them with some support - but we get to charge whatever we want for this (they pass the cost on to their customers). We certainly don't have to work full-time for them, and they know we can do this (we all have other gigs).

Thanks! Still a lot that can go wrong :-)

I signed up, looks good to me.