I think this needs to be outside of the SPV, so it’s dealt with on a deal by deal basis, I don’t see any other way of achieving it, and it still doesn’t quite sit right with me that there’s no risk but maximum reward for him in this scenario e.g. he covers his costs (either way pay it, or the startup pays it), and then he gets the upside from the equity, but I guess that is a risk there since the equity might go nowhere.

Building products for us

There are likely some products that we want built. We don’t know exactly what they are yet, but we know there will be some things that we want.

Options for this:

Toby is able to build these without charging us for it IF he gets a much larger stake in it.

So, a couple of options come to mind:

We could include a certain amount of build within the SPV payment e.g. if he wants 10%, he has to commit 10% worth of services (e.g. $100K) for free.

We could also do this on an ad-hoc basis e.g. when we think of the thing we want built, we spin that out into an entity and then the SPV gets a chunk of the equity and Toby’s side also gets a chunk of it. How would that work though? Who would actually be the owner of the company?

Listing out some potential arrangements

Core engagement - access to SPV in exchange for being an outsourced CTO:

Committing a certain amount of time/effort to being ‘on-hand’ to be able to answer questions and add value to the companies we work with.

To figure out how much equity, we can quantify how much time you’d be able to offer and how much you’d price that at, and then use that as a basis for how much equity to give you.

Ancillary ad-hoc engagements:

Service offering

Your services offered to startups: 50% cash, 50% equity.

The cash component either comes from EAH, or from the startup itself.

Startup studio offering

Collaboratively building a product, with a much larger equity stake going to BM. Creating a new legal entity to hold that startup.

Remaining questions/clarifications

What would he actually be doing for EAH most of the time? What value do we actually need?

Is there some way to structure this to reduce complexity by having a larger stake in the SPV for the studio style builds?

Maybe it is just the first stage, scoping out that is valuable? But, most agencies would do that for free? Do we really need to reward with equity for that?

Comments I deleted before sending to Toby:

Suggested figure £25K. For avoidance of doubt, this is chargeable rate, not actual cash expenditure so as to make it favourable to you.

Just to make super clear: if your profit margin is 50%, then in real terms, you're contributing £12.5K of cash, but getting £25K worth of equity in the Unit trust.

Based on the figure above (£25K), this would be 5%. Maths: Investors pay $10K AUD per 1%, so 5% = $50K $50K into GBP is currrently £26,264 So, £25K = 5%

Additionally, the build cost you are contributing is at sale price, as opposed to cost price, so it could be argued that you’re achieving an additional discount there too.

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Toby Blue Mongoose

Notes used to create doc⁠⁠

Benefits to founders

Benefits to EAH

Additional areas