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I have not much experience in dealing with shares, startups and spin-offs and hope for some advice. I work for a company as an "intrapreneur" for my own project but for a salary like a normal employee. We have just got a prospective investor who wants to invest into my project for 25% of shares. Valuation is not yet discussed (but I expect company value of 1-2 million Euro) and the whole thing is still under discussions. But if it works out this would mean creating a new start-up out of my project. I have 2 questions:

  1. I was planning to ask for a raise before the investor appeared. Now I doubt whether the right moment is now before the spin-off or wait for it after spin-off.
    a. I am not sure spin-off may happen. I definitely need a raise either ways
    b. Should I wait and discuss it during the formation of new start-up if that happens?
    c. I am thinking of asking for salary raise now. My fear is I may not have a decisive power in the new start-up if my salary is low. The new start-up may not be keen to increase costs after the formation.
    d. Any inputs, What does normally happen with salaries in such a spin off cases?

  2. Alternatively should I aim for shares in new start-up / spin-off?
    a. What could be the rough % I should aim for as a founder?
    b. I am not sure if I would be elevated to a founder in new start-up since I am still an employee of the parent company. Would my salary get reduced if I were to share ownership?

If any extra info is require to define a better picture please ask.

Dheer
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Tim Johnson
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2 Answers2

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There is no right or wrong answer here.

If you were anyway planning to ask for a raise, and had informally indicated this in the past; bring it up softly. See the reaction. Keep the door open for discussion.

Chances are they see you as critical for the new start-up and may want to keep you happy. Else they would simply ignore your request.

The second question is speculative, it would depend on how critical you are, how desperate the new start-up is, who is better at negotiating. There is nothing in rule book. As you are not founder of the start-up; at best you may be offered some shares, it is never %. Its an absolute number. And over the period the number of your shares stays same, but new shares get issued. You may make some money if the new start-up does well; else it would be worth its paper.

Dheer
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Do both.

If your participation is crucial for the success of either bringing in the outside investor, or successfully spinning off the company, then you go for both as part of your total compensation package. Renegotiate your contract.

If you're a member of the team, but could be replaced, go for a raise. Then when the spinoff occurs, ask for a share.

Xalorous
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