Questions

I'm the founder of my current startup. The new startup is an opportunity to leverage my industry expertise twice. I would get shares in the new startup, but not have control. Obviously the idea would be to create a close partnership between both startups (they are quite complementary). I'm afraid of two things: 1/ This new startup may become a direct competitor one day. The industry is very big, with the largest player having only about 5% of the market. Still, our two startups are two of the very few players with an innovative concept in the industry. 2/ The insights that I transfer to the new startup, may spill over to the rest of the industry more easily (as I have little control), reducing our competitive advantage. How could I craft this partnership so that my two fears can never materialize?

I am not a lawyer and am not giving you professional advice here. Merely discussing the topic.

I see what they are getting from you...but what are you getting from them?

You lose control...they get your expertise...you can be booted out at any time thereafter.

I don't see the upside.

If they want your expertise, they can pay you for it: hire you, license your product, etc.

If they don't want to work with you as a separate entity, that should tell you a lot about their true intentions and how badly they truly need you (or don't).

I personally would not get involved in an offer like the one you've described. You can still be friendly, offer to work together, be complimentary as you say, but I don't see any reason for you to give up control for a few shares in someone else's company, transfer your knowledge, and then be at risk of being kicked out because they don't need you any more. Plus, do you really want to be a minority shareholder and treated like an employee, rather than the owner?

I suppose you could have a legal agreement drafted but secrecy never lasts and your insights WILL be leaked sooner or later. I also doubt your position in the firm can be protected. Speak to an attorney as I am not an attorney.


Answered 5 years ago

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