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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.

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  • Is your parent company aware of the investor? Who owns the project now, you or your parent company? Are you planning to spin your project off, or is your parent company planning to spin the project off and keep you attached so you would be an employee of the new company?
    – quid
    Oct 26, 2016 at 22:39
  • thanks for a comment. My company is aware. In fact a friend of investor saw me on a pitch event which I have actually not won, however this investor got interested. who owns the project? tricky - I was at the very beginning of it and idea is partially mine, partially of my CEO. we both think spinning off makes sense but we have not spoken of would i be a co-founder or just an employee. I start thinking now that i should claim being a co-founder even though i have a feeling that i am not irreplaceable. it would just take them time to find a suitable person who is into the subject.
    – Tim Johnson
    Oct 28, 2016 at 11:34

2 Answers 2

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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.

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  • Thank you. Do you think I am not in position to claim be a co-founder? Even though company paid for everything i did, i was still at the very roots of the project - even names of the company and product are my creations. A friend says that co-founders should aim not less than 10%.
    – Tim Johnson
    Oct 28, 2016 at 11:37
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    @TimJohnson the reality is without any written agreement, it's up to your negotiation skills. Some of the factors that can work in your favour would be how much indispensable you are. Else every thing you did is owned by parent company. You have no rights
    – Dheer
    Oct 28, 2016 at 13:19
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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.

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  • Thank you. I think my current CEO will be wiling to have me there but he is a bad-ass negotiator and is able to find 100 reasons why someone doesn't deserve this or that. :)
    – Tim Johnson
    Oct 28, 2016 at 11:40
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    The best negotiators find the middle ground where everyone gets most of what they want. Consider what you really want. Consider the least you would accept. Plan what to do if you get an acceptable offer. Plan what you'll do if you do not. Ask for what you want. If they won't meet your minimum, exit the negotiation gracefully. Your exit strategy can include going back to your current position, but you should carefully consider whether going after the new position will burn any bridges. If so, seek other positions alongside going for the new one.
    – Xalorous
    Oct 31, 2016 at 18:06

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