I've never done a deal any where near as big, but I've wrangled the bulk of my income over the past twenty years from clients rather than employers - you won't hurt my feelings if you decide I don't know what I'm talking about.
My opinion, the LOI in a week is fishy. A cursory glance at your situation should be enough to scare them off such a tight timeline until you guys have your shit together regarding corporate structure and IP ownership - right now, there is all kinds of risk associated with your acquisition because there are no formal relationships between your team's members. Nothing personal, but you guys sound like a litigation clusterfuck waiting to happen. Not just for them, but for their enterprise customers as well.
The $2m now or $6m later is also suspect. Notice that you've pegged the deal at the higher figure in your title? The four of you are thinking low Fuck You money, but do you think they're really going to cough up an additional $4m when they can't raise half that? And if you are worth $6m, you can bet your ass someone will probably loan them $2m pretty damn quick.
Of course that's assuming you ever get paid at all.
Ever heard the expression, "Borrow a thousand dollars from the bank and the bank owns you. Borrow a million from the bank and you own the bank?" These guys are going to own you.
Once you have several million riding on their success, their problems become your problems - even those outside the scope of your software.
So now for the answers to your questions:
1. Screwy deal structures are not uncommon in the industry I'm in, people getting screwed is not uncommon either.
2. The biggest gotchya's are greed and an unwillingness pass on a sketchy deal. If your team and project is really worth something, this won't be the last deal you ever see in your life.
3. The starting point for negotiation should be to put all the cash in your pocket today. The reason they are "able to move so quickly" is because it won't cost them anything to try out your software - and they can probably get you guys to throw in a bunch of effort to make things work without any additional cost as well.
Comments
I've never done a deal any where near as big, but I've wrangled the bulk of my income over the past twenty years from clients rather than employers - you won't hurt my feelings if you decide I don't know what I'm talking about.
My opinion, the LOI in a week is fishy. A cursory glance at your situation should be enough to scare them off such a tight timeline until you guys have your shit together regarding corporate structure and IP ownership - right now, there is all kinds of risk associated with your acquisition because there are no formal relationships between your team's members. Nothing personal, but you guys sound like a litigation clusterfuck waiting to happen. Not just for them, but for their enterprise customers as well.
The $2m now or $6m later is also suspect. Notice that you've pegged the deal at the higher figure in your title? The four of you are thinking low Fuck You money, but do you think they're really going to cough up an additional $4m when they can't raise half that? And if you are worth $6m, you can bet your ass someone will probably loan them $2m pretty damn quick.
Of course that's assuming you ever get paid at all.
Ever heard the expression, "Borrow a thousand dollars from the bank and the bank owns you. Borrow a million from the bank and you own the bank?" These guys are going to own you.
Once you have several million riding on their success, their problems become your problems - even those outside the scope of your software.
So now for the answers to your questions:
1. Screwy deal structures are not uncommon in the industry I'm in, people getting screwed is not uncommon either.
2. The biggest gotchya's are greed and an unwillingness pass on a sketchy deal. If your team and project is really worth something, this won't be the last deal you ever see in your life.
3. The starting point for negotiation should be to put all the cash in your pocket today. The reason they are "able to move so quickly" is because it won't cost them anything to try out your software - and they can probably get you guys to throw in a bunch of effort to make things work without any additional cost as well.
Take it for what it's worth and good luck.