It can be an exciting opportunity… but it’s also a big decision that can have a huge impact on the next chapter of your career.
Here are our thoughts on when it is and isn’t the right move to accept a minority stake in a new venture.
Who’s creating the value?
- If the company pays £100,000 of profits to shareholders, the other person receives £80,000 and you receive £20,000.
- If the company is sold for £1m, the other person receives £800,000 and you receive £200,000.
All this is fine, as long as you feel confident that the other person is creating 4x more value than you are – and is entitled to 4x as much reward…
When does it make sense?
- You’re comfortable that someone else will own the majority of the financial rewards
- You feel that the other shareholder’s contribution to the company’s success will be significantly greater than yours
- You feel that the initial valuation of any investment is fair and competitive
- You are comfortable not having control of what you’re investing the next years of your working life towards
- You don’t have confidence you could achieve success independently