Posted by John on 6/02/07

More | Report Post

My startup company has reached a rough point in its
existance. We had an angel investor relationship with one
of our contacts, and we received some funding from this
entity. All of this was executed without any existing
contract between us. During this time we attempted to
reach an agreement, but the terms the investor kept
providing to us were insane (VC style returns w/ 4x return
+ 35% of stock options etc!) Well, we have had to let go
of all of our employees, and are struggling to stay alive
at this point with existing leases (office, equipment
etc).

Our investing entity had another business that we were
managing for him, and we operated our business off a cash
flow basis. We gave him a budget at the end of the month,
he transfered money in on the 15th, we paid bills. In
april this ceased, after we had already submitted the
budget, and without any real forewarning, he stated that he
was no longer funding us without an agreement. 100%
understandable, except the agreements he presented at this
point were 4x return with personal guaranties, plus 35%
stock option, and no additional funding. At this point, he
said we would be free to seek additional funding
elsewhere.

However, we are stuck with this unresolved debt, no
agreement with the initial investor, and the company
lurching in some murky waters now. What are his rights?
Did he put money into our company? Absolutely. He also
cut off funding without warning, a day before payroll, and
also after we had ramped up spending (by 3x for the month)
under the understanding that he would fund it.

Nothing is written or signed at all with this investor. I
want to pay the man back, but I also want to pay my
employees taxes for Q1, the healthcare plan we had just
purchased, the leases to the realty agency, Dell etc etc.

Do I have the right to approach other investors? What are
his rights to the software I have developed?

Investment w/ no Contract or additional Funding, 6/02/07, by John.

Business Law Chatboard

LATEST POSTS | BY TOPICS | SUBMIT A POST