> Just a character evaluation here, but if they are willing to cut this other company loose, I think you should evaluate how binding they consider contracts to be before you enter into one with them yourself
I'm fairly sure they don't have a contract with the other company, the time pressure is that they were about to sign an LoI with them.
> At the very least I would ask them to make a substantial (500K minimum) deposit against the balance up front. If the don't have the cash to do that, I would not deal with them as they probably shouldn't be doing acquisitions.
I'm not sure, they've been open about their financial situation and I understand why they've proposed the deal structure that they have.
> Other crazy idea: this is HUGE validation, go raise VC against this offer and make it a real business.
Problem is that I've already got other projects that would be extremely difficult for me to abandon.
> Also, if they are truly in the enterprise space and can afford to acquire companies to "solve a difficult problem for them" they should be able to pay you serious money and $2m in first 12 months should be no big deal.
Like I said, I'm familiar with their finances, and that isn't an option for them.
> Another thought, If you are really going to get in the business of giving a $6M loan over 3 years with your 3 cofounders, you should consult a lawyer about more than the LOI. The entire corporate structure needs to be designed to make sure people get paid out correctly and that taxes are accounted for.
Lawyers and accountants will all get to have their say before anything is signed.
Did they already sign a LoI with the other company? If so, then while this not as bad a breaking a signed contract, it is a big warning sign as well. It means they probably have told your "competitor" also how great they are, how important their software is for their business etc - just to keep on looking for something else. Would be a big red flag with regards to trustworthiness.
I'm fairly sure they don't have a contract with the other company, the time pressure is that they were about to sign an LoI with them.
> At the very least I would ask them to make a substantial (500K minimum) deposit against the balance up front. If the don't have the cash to do that, I would not deal with them as they probably shouldn't be doing acquisitions.
I'm not sure, they've been open about their financial situation and I understand why they've proposed the deal structure that they have.
> Other crazy idea: this is HUGE validation, go raise VC against this offer and make it a real business.
Problem is that I've already got other projects that would be extremely difficult for me to abandon.
> Also, if they are truly in the enterprise space and can afford to acquire companies to "solve a difficult problem for them" they should be able to pay you serious money and $2m in first 12 months should be no big deal.
Like I said, I'm familiar with their finances, and that isn't an option for them.
> Another thought, If you are really going to get in the business of giving a $6M loan over 3 years with your 3 cofounders, you should consult a lawyer about more than the LOI. The entire corporate structure needs to be designed to make sure people get paid out correctly and that taxes are accounted for.
Lawyers and accountants will all get to have their say before anything is signed.