For self-funded searchers; would you take CEO position + sweat equity?
March 24, 2020
by a searcher in Toronto, ON, Canada
I am operating a self-funded opportunistic search in Toronto, Ontario. I have come across a few opportunities whereby, instead of running an acquisition of the company, I would be placed as CEO and earn sweat equity in the company (combination of upfront plus vested, requiring a liquidity event down the road). Have other searchers explored these types of opportunities? What are your thoughts?
in New York, NY, USA
Also you want to see what you bring to the table Dan that can be used as leverage for the other parties.
Perhaps a broker has another buyer lined up ( maybe willing to pay more than you are )and the only way to close the deal is if the investor has an operational partner ( possibly you ). This would free the buyer from day to day operations and in position to receive returns. The broker gets they're commission and you now are left to do the work. This may not a always be a bad sign, could possibly means they believe in you enough to give you a chance to prove yourself as a competent business manager.
You may even possess a good understanding of the industry or business and other parties want to leverage that knowledge for themselves. Or perhaps they simply don't have the time or energy to take on this venture.
Nonetheless, use discernment once you figure out what they see in you. See if you can use it to your advantage.
from Carnegie Mellon University in Chagrin Falls, OH, United States
-Make sure it's very clear what the goals are for the first year, 5 years, etc. You want easily measured outcomes that will directly translate to your compensation/equity earnings.
-Ask for some equity to vest at closing, with strict language around what events cause you to lose that equity. If you get fired, they decide to sell the company right away, or you die in a freak accident, what happens to your equity?
-Are you relocating to take this job? If so, try get get the company to cover those costs or give you a signing bonus so you aren't investing your own money in an uncertain outcome.
And so on. Like others have said, it could be a very interesting opportunity, but you will not be in a position to have much control once you take the job.