Questions

Is there a type of agreement which articulates a consultant's first "right of refusal" for an equity stake and C-level position if/once a company gets Series B funding? Perhaps based on consultant performance or other metrics? Is there precedent for this? Is there a name for such an agreement? Would it be binding? I am in discussions with a 5-year old consulting company which is launching an arm of their business in which I have expertise and that also overlaps with a concept which I've been exploring over the past few months. In this case, I would lead the effort to launch this arm of their business under their brand (part-time). This would include business development, bringing on the consulting team and be on a part-time basis. They just raised Series A; they plan to seek a Series B round next year. If they get Series B, they say that I could be brought in f/t with an ownership stake and proper pay, assuming that all goes well with my consulting stint. I just don't know if there's a type of agreement which articulates first right of refusal for this equity stake and/or C-level position if they get Series B funding. If it exists, is it binding and what is it called?

This sounds incredibly convoluted and problematic for you. Generally, any financing structure that is this unique is a turn-off to new investors, especially institutional investors. That they've recently raised funding for their business but are contemplating building a new business with you (as a subsidiary) is a concern unless this was part of the plan they articulated to their investors and investors are aware and supportive of this initiative. Finally, it seems as though you are being asked to invest a lot of energy in something that is entirely dependent on future funding validating the business, which is always a significant risk.

Obviously, I'm missing a lot of details and so happy to talk in a call but I would say based purely on how you have defined this situation, that it seems more trouble than it's worth to you.


Answered 6 years ago

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