Equity Fund Raise

searcher profile

September 29, 2023

by a searcher from The University of Chicago - Booth School of Business in Hoboken, NJ, USA

I am currently under LOI to acquire a company in New Jersey. I am getting great response from Investors. But, one of the big investor is asking to

Add waterfall distribution

Add a salary cap to my compensation.

Are these requests normal?


I would greatly appreciate your comments. If you have some time, would love it if you could DM me for a 15 min conversation.


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commentor profile
Reply by a searcher
from University of Pennsylvania in Miami, FL, USA
Hi Gautum...Normally there is a waterfall.
First: investor capital + pref return
Second: common equity split between investor/searcher

Salary cap is reasonable. Investors do not want you to be taking huge salary and leave them with small distributions.
you could bake in a bonus. i.e.
salary $150K + X% of EBITDA above a certain threshold
commentor profile
Reply by a searcher
from University of Massachusetts Amherst in Boston, MA, USA
These are normal but it ultimately depends on your deal and size of the company. I would be surprised if your other investors are not expecting a similar waterfall and salary cap and just have not asked yet given that it is so standard in deals
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