In on the ground with successful company. Sell out now or hold?

[Anonymous]

DH made a significant investment in a start up company. The company is growing exponentially. He has been offered money to sell his share now, before the company is sold to a bigger company, with different management. The potential upside is large, but so is the risk. Sell now and take the money, or wait until later and see how it plays out. We could use the money now because he is self employed.

[Anonymous]

OP how much money?

[Anonymous]

Agree it depends on how much money, how much of your financial security is dependent on it, etc.

[Anonymous]

OP here. It is right in the middle. Retirement plan is half full and we are older. Still have college to pay for 2 kids.

[Anonymous]

Anonymous wrote:OP here. It is right in the middle. Retirement plan is half full and we are older. Still have college to pay for 2 kids.

In the middle of what?

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP here. It is right in the middle. Retirement plan is half full and we are older. Still have college to pay for 2 kids.

In the middle of what?

In the middle of our savings plan. About 2x annual salary (after tax). So sell now and fill up our retirement (modest) or wait until later and hopefully have income from the company.

[Anonymous]

Or have I lost my mind, and the answer is: take the money now!!

[Anonymous]

You need to talk to a lawyer that specializes in the venture capital and private equity space.

The issue here is not as simple as you make it. Are his shares preferred? Is there an anti-dilution clause? Is the company getting another round of investments, and if so is he required to 'pay to play'?

Etc.

Seriously - I used to work in VC.

[Anonymous]

Still unclear what you are saying.

What % of your total assets would the payout be?

What % return on your original investment -- double? triple? more? other?

How long ago was the investment made?

I'm leaning towards sell but don't have enough information.

[Anonymous]

Anonymous wrote:You need to talk to a lawyer that specializes in the venture capital and private equity space.

The issue here is not as simple as you make it. Are his shares preferred? Is there an anti-dilution clause? Is the company getting another round of investments, and if so is he required to 'pay to play'?

Etc.

Seriously - I used to work in VC.

Yes, it is very complicated, frankly beyond me. It is a highly regulated energy industry and he owns a small percentage of the company. You cannot sell without permission. Yes, it is another round of investments. Yes, I would say there are clauses, but that hurdle is cleared for now. Only one investor is selling so far.

[Anonymous]

Anonymous wrote:Still unclear what you are saying.

What % of your total assets would the payout be?

What % return on your original investment -- double? triple? more? other?

How long ago was the investment made?

I'm leaning towards sell but don't have enough information.

Thank you for your reply. It would double our assets. It would be 20x times the investment. It is a year ago. We keep asking ourselves: is this real? But apparently it is.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Still unclear what you are saying.

What % of your total assets would the payout be?

What % return on your original investment -- double? triple? more? other?

How long ago was the investment made?

I'm leaning towards sell but don't have enough information.

Thank you for your reply. It would double our assets. It would be 20x times the investment. It is a year ago. We keep asking ourselves: is this real? But apparently it is.

If you can sell now given possible restrictions, then I'd certainly consider it. Sounds like you should talk with an attorney or accountant.

[Anonymous]

I am pretty risk averse so I would probably sell, but I probably would not be in that situation to begin with.

You might consider whether you'd be more disappointed if things fall through or if you cash in before the peak.

[Anonymous]

is it all or nothing? Can he sell a part? If yes, Iwould.

[Anonymous]

OP here: more info:
DH invested in a start up energy company. He is a certified expert in this field with many years of experience. He has 2.5% of the ownership, so he is a small investor. He put money in in a time when they needed cash for operations, but before the project was viable. He also served as an advisor.
Now the company, which is private, is being purchased by a very large investor. This is a necessity b/c power plants are expensive and need bank loans to operate – they are huge projects in terms of cash in and out. The project is about to jump from an investment among several investors (22) to a big corporation.
This is a dream come true. But when a big corporation comes in, they are very powerful, and can easily squeeze any small person out.
The corporation would prefer fewer owners (of course) so they are offering to buy out anyone who would like out. Only one has sold, and we are pending/thinking. We are the only middle class investors. DH is involved because he is an expert in the field. Being private, there are restrictions on sales – permission to sell has to come from the controlling owner/new corporation.
Anticipated growth is huge because of location/state support, ect. We planned to sell eventually, but is now the time, or wait until the next round? We would receive 20x our investment. Thank you in advance for your input.
DH is brilliant but sometimes overthinks things. Like asking me!