How much equity should I give our first investor/legal advisor?


2

I'm currently starting up a mobile social networking application with zero funding. The app is currently in the mvp stage with a very thorough business plan, and my business partner and I are currently negotiating a software development contract with our server side developer.

We have found an acquaintance with law experience who has offered to fund our project around $12-14k to cover the server developer's work, as well as a provisional patent. Including this financial investment, our acquaintance has also offered long term consulting services.

We are also thinking about giving him decision making rights in the company. How much equity does our acquaintance deserve for his funding and services?

Advisors Equity Startup Costs Legal

asked Feb 1 '13 at 04:29
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User23813
13 points

3 Answers


4

I'll recommend you separate the role of legal counsel from investor so you get objective legal advice to prevent conflict of interest. I've heard of inexperienced entrepreneurs who ended in a jam because they signed non-diluting terms with their legal counsel (who was also an investor).

No harm with trust, but better to have independent advocates and understand all the terms before jumping into a relationship. I hope the relationship work out for you.

answered Feb 1 '13 at 06:29
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Global Nomad
326 points

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according to me the legal issues must have a separate place, means all the legal issues have to be maintained separately .And the investors and legal advisers must have in contact but, in your case you must discuss this issue with another lawyer too, because being normal people you must be not knowing all the legal terms and conditions, you may get cheated too. so be careful, and think twice.

answered Feb 6 '13 at 18:53
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Luis Mier
1 point

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You should size up the amount of work and IP each of you is committing and agree on the value of that. In the future, it's always possible to agree on diluting equity or change the ratios...

answered Feb 1 '13 at 05:45
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Gyuri
101 points

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Advisors Equity Startup Costs Legal