Question: I'm a Co-Founder selling my equity due to disagreement, has anyone sold equity to 3rd party to gain best value in the exit after 3 years sweat equity?

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I'm a Co-Founder selling my equity due to disagreement, has anyone sold equity to 3rd party to gain best value in the exit after 3 years sweat equity?

We have two Co-Founders currently, and the business has only achieved sub $500,000 in revenue 3 years running, with only $25K each total paid to both Founders over entire 3 years. The rest has been reinvested in a few staff part-time salaries and company growth - marketing, digital, product development etc. I'm now seeking reasonable equity and my Co-Founder is undervaluing so I'm exploring corporate buyers.

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Mike Magolnick

CEO, Social, Digital, Critical Marketing, Strategy

In this business environment, a “corporate buyer” will be looking at your net income and value you based on a multiple of such. For example if the company generated $500,000 but only earned $75,000, you may be looking at a value of $200-$300,000 from a corporate buyer. It also depends on whether or not that revenue is stable and is reliant on you and your partner, in which case you might get an even lower pay out.

Answered about 6 years ago

Evan Weber

Digital Marketing Expert

Sweat equity isn't worth much in my opinion.

Answered about 6 years ago