Exchanging Cash with Late Stage Startup Options

New / Eng msft_girl
Oct 27, 2018 22 Comments

A friend owes me about $28,000. They work at a late stage startup which is doing well based on growth numbers, and can IPO in a few years. We thought about exchanging 28k with the equal amount from the startup options, since they're short in cash and it can take a while for them until saving up that money, given other debts they have.

Since the startup is in breakout stage, it can get even 5-10 times the current value. On the other hand, there are obvious risks. I'm actually a user of the product and find it very useful, and I know very smart people working there, but you never know how finances can go.

Given that we are very good and close friends, and I trust them %100, do you recommend taking this deal?

What actions should I take to formalize this, in case I wanted to move forward?

Thanks!

92 VOTES SELECT ONLY ONE ANSWER
VOTE VIEW RESULT

comments

Want to comment? LOG IN or SIGN UP
TOP 22 Comments
  • Microsoft / Eng Gs4478
    “very good and close friends” and lending/borrowing money never ends well
    Oct 27, 2018 5
    • New / Eng msft_girl
      OP
      Well, if your very good and close friend is in desperate need of money, what would you do??
      Oct 27, 2018
    • VMware / Product lRQQ72
      I do lend and borrow money with my 2 closes friends. It worked well so far. And I did one deal similar to yours made 350% on the 35k in 4 years
      Oct 27, 2018
    • Microsoft / Eng Gs4478
      Never lend money to friends, I’d either gift them the money or not.
      Oct 27, 2018
    • VMware / Product lRQQ72
      Disagree, you can make the best friend by loaning money in need
      Oct 27, 2018
    • Apple Magic Bean
      Similar to Microsoft but I think you can lend your friends money just fine but don't expect to get them back. Treat it as if you've burnt it. If you get anything back, that's bonus.
      Oct 28, 2018
  • Genentech / Eng ratsey
    Research the company as you would any other 28k investment. If you think the shares are undervalued, take the shares. If you’re not comfortable with any 28k investment, try to negotiate a middle ground we’re you get enough cash to make you comfortable
    Oct 27, 2018 0
  • ServiceNow
    pk2403

    ServiceNow

    PRE
    Salesforce
    pk2403more
    How are you trying to do this ? Is he going to transfer 28K worth shares or options in your name ? The company he works for should allow it to happen. The best way I would think is ask him to sell the shares on EquityZen or some platform and return your money. This way the relationship won’t impact in future. If you’re interested to buy them buy through the platform he lists as you’ll be legally safe.
    Oct 28, 2018 2
    • New / Eng msft_girl
      OP
      Haven't thought this through. I haven't used eqityzen, but it's a good idea. But we need to make sure immidiately after they sell, I buy, so that no one else is buying in.
      Oct 28, 2018
    • New / Eng msft_girl
      OP
      Also, they still need to give me the cash for buying from equityzen
      Oct 28, 2018
  • I don't think you can do his legally and without him paying the taxes on these shares or options.
    Oct 28, 2018 1
    • New / Eng msft_girl
      OP
      Hmmm then I should ask for 28k after tax.
      Oct 28, 2018
  • LeanTaaS thuglife
    Are you going to have some written agreement about that?
    Oct 28, 2018 1
    • New / Eng msft_girl
      OP
      I haven't figured how. I don't know if the written agreement can be legally binding, but morally can be. Although I don't think it's necessary in this relationship.
      Oct 28, 2018
  • Intel Magnetic
    You gave him 28000 and asking much more?
    Oct 27, 2018 4
    • New / Eng msft_girl
      OP
      No, I gave them a total of 28k over past 2 years, and they don't have cash to pay me back anytime soon, also I don't know if it's going to be "much more" or even "more".
      Oct 27, 2018
    • Intel Magnetic
      Go to small claims court if your money is not getting back to you. Remember there is statue of limitations.
      Oct 27, 2018
    • New / Eng msft_girl
      OP
      You might have missed that they're close friend, court is not an option.
      Oct 27, 2018
    • Intel Magnetic
      I hope you will get your money back.
      Oct 27, 2018
  • Uber UberAIR
    Late stage startup that’s short on cash and cares for a 28k investment, and going to ipo soon? None of it sounds right...
    Oct 27, 2018 1
    • New / Eng msft_girl
      OP
      The startup is not short on cash obviously! The person who works there and is granted the stock option is short on cash and is willing to exchange equivalent of 28k of the total grant with cash.
      Oct 27, 2018
  • Microsoft Blkman
    This is a difficult question. There are no good answers here.
    Oct 27, 2018 0