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Backdated day rate with a startup

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    Backdated day rate with a startup

    I'm negotiating a contract with a cash strapped start up. They've proposed either:

    Option 1
    Cash day rate £200 + £200 in share options

    Or

    Option 2
    Cash day rate £200 + £200 in back pay (payable on an event, likely their next fundraising round).

    I'm leaning towards Option 2, but how does this get policed/governed in practice? What is to stop them from using me for say 3 months, then ditching me, and two months later they raise funds but don't tell me.

    There is not much guidance I can find online about this kind of structure for contractors so I'm thinking there's a reason for it that I don't know about.

    Cheers

    #2
    I once took a contract on a low day rate, but that I would get 15% of any sales in the first five years. Paid off my mortgage and then some.
    The only ambiguity was whether the sale price was sale price, sale price less salesman commission or profit. We settled on the middle one.

    However, it was the third time I'd taken such a punt and the only time it paid off. Definitely worth it though.

    Take the equity.
    Down with racism. Long live miscegenation!

    Comment


      #3
      I would assume your £200 and not expect the extra. It's far more likely that the fundraising never happens than they try and hide it. If they feel need to not pay you it means they're failing and they wouldn't need to pay you according to the contract anyway. If they succeed they'll be awash with cash and will want to keep you.

      Far more businesses fail than succeed so you're taking a punt.
      I'm alright Jack

      Comment


        #4
        Agree with BB. Massive punt. You might get lucky with stock, but you probably won't. If you take the risk, make sure you get a commercial review, not just an IR35 review (because you don't want the contract to be full of holes, on top of the inherent risk).

        Comment


          #5
          I have been involved in these deals before since 2002 in fact

          Ask yourself.

          Do I have the appetite for the risk?
          Can I afford to lose the lot?
          Will I replace the work and therefore income easy enough?

          Share options are being offered here not actual shares.
          For option 2. You need it in the contract you get paid the back pay for the days worked even if they bin you off.

          How good are they at paying for normal things such as printer paper and blue toilet flush? have they paid any staff late? paid staff expenses late? Does the company have tangible assets, plant and property? laser printers and desks do not count.

          Big point regarding governance. Its down to you and you alone. Solution. Get a bloody good contract done on your terms with little or zero wiggle room for them.

          I do lots of work on deals like this, you are welcome to send me more info privately and I check them out for you or even ask me questions on this thread. I will happily help out.
          Former IPSE member
          My Website

          Comment


            #6
            Someone quote the number of startups that fail to put it perspective for the OP?

            Had a number of working for start ups threads and I don't think one of them ended well.

            Only do this if you are 100% happy with the worst case scenario.
            'CUK forum personality of 2011 - Winner - Yes really!!!!

            Comment


              #7
              Thanks for the replies so far.

              Fully aware that most startups fail, hence I'm leaning towards option 2 above which is to take back dated cash rather than share options. The company are pushing back a bit on this option however, arguing that they will need to pay my agency (the recruiters that connected us) a higher commissioning fee compared to the share option route.

              There just doesn't seem to be much guidance on this particular scenario out there, and as this is my first contract (been perm since forever) it makes me a bit suspicious.

              Comment


                #8
                Originally posted by northernladuk View Post
                Someone quote the number of startups that fail to put it perspective for the OP?

                Had a number of working for start ups threads and I don't think one of them ended well.

                Only do this if you are 100% happy with the worst case scenario.
                Bang on advice right there. I've assessed the worst case scenario (which is I do work for them and don't get paid at all) and I'm happy with that because I'm interested in the work and I'm using the opportunity to upskill in a period of unemployment.

                Comment


                  #9
                  If you're nominal day rate is £400, I'd be looking for a premium to account for your risk. so £200 + £400 in share options (biggest risk) or £200 + £300 from next round of fundraising.

                  But, in your head, admit you're getting £200 a day and anything is a bonus with a < 5% chance of fruition.

                  Comment


                    #10
                    Backdated day rate with a startup

                    For what it’s worth, don’t touch share options.
                    Shares maybe. But share options are usually tied to other factors.
                    Also, if you take shares understand the terms of the shareholders agreement.
                    If you have less than 20% you can be diluted by the others at their whim.
                    See You Next Tuesday

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