Manipulated into taking a bad deal from an angel – will a VC will buy them out?

I didn’t have room to fit this in but before I started this company my first company bombed in late 2019 when I was 23 and it left me in a ton of debt and my finances in shambles.

I met my mentor when I was seven years ago when I was 18. He was very successful and built/sold a company in the 1980s

I’m still paying everything off to this day but my mentor (who is 75 years old and a longtime entrepreneur) last year offered to pay off the very high interest loan I had. I’ve been paying him back without fail.

it isn't clear from your description how much of your company you own or if you have signed any contacts or not

Sounds like you have it right - they are strong-arming you over what is just an offer, not a contract. (IANAL).

Frankly, drop them. Instantly. These are not people you want as partners. Take the better deal.... not just because it is better, but because you never want to sign on with people who refuse to negotiate or act like they own you. If you hate it this much just when talking, imagine how horrible it would be when they truly do own some of your work.

It sounds like they didn't pay anything and that you didn't sign anything. If this is true then you owe them nothing. Why haven't you told them to fuck off?

>If I took his offer and not theirs they would see it as me cutting them out and as a betrayal.

If this is the sort of language they used then I would run from these people as fast as I could. Don't let anyone emotionally blackmail you into doing something you don't want to do. If this is how they're acting now imagine how bad it would be if they were actually your business partners and had actual rights as share holders of the business?

>I’m sick to my stomach over it. I can’t get rid of them. I can’t negotiate.

Try to remember that you have no obligation to even speak to these people.

Also, please get yourself a good lawyer before you sign anything with anyone; and especially don't sign anything that people are "strong arming" you into signing.

>The only hope I have (in my mind) is if I can raise a round in the next year and have them bought out. I don’t see any other way.

You can just politely tell them "no thank you, I'm not interested anymore."

I would love to help out here for $1 I can act as your short-term CFO on contract and help you navigate this and get the deal that makes the most sense for you. LMK

I'm the CEO of my own startup and have dealt with these things before.

Is there really any value for the mentor at this point? That's the question you should be asking.

But I already have the answer: There is none at best, and negative at worst. You are not a mentor if your goal is to down-bid a company for your proper gain; he is acting in bad faith.

If you have no legal relation to this guy, simply send them a friendly email that you are no long communicating. Meanwhile, I'll string along until you raise the former-boss round and money is in your company's bank account.

You don’t owe anyone anything until you sign the papers. Don’t let them strong arm you. If they can’t match, then it’s on them. Sounds to me they are just looking for a payday since they realize their valuation is a huge discount to what your old boss is willing to pay. Learn to say No.

As everyone is saying, obviously drop the “mentor” dude and his BS offer. You can do it in a polite way and if they take offense that’s on them. Additionally, you need to find an impartial business advisor. Because if you’re botching this situation (and you are) you’ll botch others. Try to find a real mentor or a good startup lawyer who can advise you in the future.

The reply from @dnh44 is perfectly on point.

It sounds like a terrible situation with an easy solution (a utilitarian email to the first company advising you're not taking their offer).

This part is bizarre:

> Oh, and they want a 30% dividend paid quarterly.

That's a very weird request from an angel investor.

There are a lot of great lessons to be learned from this situation. First, you have to do what you think is best for your business...and that's not always easy. You will damage relationships making these types of tough decisions and that's just how it goes. If you don't have the stomach for it, how are you ever going to fire someone who isn't getting it done, when they have a family to support?

Many VCs will try to create a no-shop dynamic...they make you an offer and you can't use that offer to get a better one from someone else. However, you have to do what's best for your business - even if they won't like it. And BTW, if all they have to offer is cash and locking you in via guilt trip, if you have an alternative, you should ditch these folks. But, you don't always have an alternative.

The last thing you should consider is that no one will ever be better to you than when you are just about to sign on the dotted line. If this is how they treat you now, how do you think it'll go in the future? What kinda crap do you think they'll try to pull when you have a real problem?

Their solution of adding the other person for the round and the only person to get diluted is you, especially under the terms you listed, is a huge red flag. First off, you would take all the dilution. Secondly, the numbers don't make sense. They propose that the other VC, coming in with 2.5x the cash, and a higher valuation gets way worse terms then they get...that's a helluva counter offer.

If you want to raise more money, that's fine. But, the person writing the biggest check typically sets the terms. But, you know what's a great way to figure out if someone is going to be a good partner? Go to Brad and tell him what's up. He'll probably have good advice AND if you agree with him / empower him, will probably reach out to the other party and come up with terms or just cut a bigger check and keep those folks out of the deal. Either way, it's a win for you.