Need Help Deciding on Mentorship/Funding Deal that Extends for Life

I am a software engineer and solo entrepreneur. I am working on a patent for my own company that will change how data is stored. The goal is to license out this technology to other companies so they can use it on their own systems.

I need funding to pay for the patent fees (planning on up to $30k for full utility patent, even though we are going provisional first). I also would like mentorship since I have only a few years business experience and only a couple business connections. I have no access to easy funding, e.g., family is poor, friends are poor, no assets for loans.

A CEO I worked for before recently came back into my life and is interested in becoming business partners. He is not in the tech industry. He has been in business for over 20 years and runs a $30M/year company. He has a strong network and connections to other potential investors. He has great relationships with other CEO's of bigger companies, some of which could become licensees for my patent.

He is proposing a me/him, 90/10 equity split and loaning (with interest) the company the funding for the patent fees. He will mentor me and make introductions to people in his network when needed. He will also help in marketing and finding investors if we need more funding.

This is all great, the one caveat that I need help with deciding on is: he wants this 90/10 split to extend for all other companies that I start in the future that are related to this patent or not. I already have two companies fully ready (2 years of work) to start that are related to the patent. He is aware of these two companies.

He says this type of deal is how he started in business with his mentor and what he has done all throughout his career with other companies. He is very loyal and wants our relationship as business partners to be for life and for us to be great friends. He isn't trying to pressure me, and suggests that I think hard before committing, because he wants there to be no regrets and for us to have a healthy relationship for life.

I need your help, please:

  • Is this type of deal normal? Have you heard of these types of deals before? Any horror stories that came out of this kind of deal?

  • On raising from VC's, how do you think they will feel about this deal? Will they see it as a co-founders setup? Or will they be turned off by his presence and that he automatically gets a piece of the company?

  • How do you think I could benefit from this deal? How do you think I might get burned in this deal?

For now I am leaning toward accepting the deal, but I am trying to think out possibilities that could back fire on me or hurt my future as an entrepreneur.

I'll update this post as I think of more questions or new scenarios. Thank you for any help or insight you can provide!


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s