Hi everyone. I have been approached by my former boss. He is starting his own cannabis extraction business, and he needs someone with the technical expertise to join him. He said to me that I will be given some shares in the business for my technical expertise, and I will also work under him and be given a monthly salary and allowances. We have not yet agreed on figures yet. I just want to ask on what figures I should start negotiating this deal. I am a chemist by profession with a deep passion for the cannabis industry.
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Pay beats out equity in the short run with much lower overall risk. Equity has the potential to beat out pay in the long run, but can be high risk.
You at least need a contract to lock in your services for at least a year so you don’t just get shoved out the moment your knowledge can be employed by cheaper labor, and if you’re pulling a salary your equity ask will need to be substantially lower than without it.
Try to keep in mind the supply and demand between your field and investor money. How easily can you find another person to do this with vs. How easily he can find another person with your skillset.
Then there’s the overall business side of it. What percentage of the functionality of the business is based on what you bring in compared to what he does for the business. Weigh all that together and determine his desire to negotiate to decide if you ask a touch high and settle a little lower or just come in a little lower out the gate firmly.
Oh, and don’t forget the spice of desperation, who is in a better position to say no? That’ll also impact your offer if either of you is a touch more cutthroat.
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Yep yep. What he said.
Plus use of license, redbull fridge, ultimate hiring and firing power.
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Are there a lot of successful extraction business in your state?
If so take equity and decent pay
If not take great pay
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What are the terms of the shares being issued? Are there enough to be subject to regulation by the SEC? Does he have the right to issue unlimited shares at any time, therefore diluting the value of yours? Do you get to see accounting statements verified by an independent 3rd party? And can he just bankrupt the company at will in the future to get out of paying you?
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If the shares aren’t in a public company, they’re going to be functionally impossible to sell, and you should probably treat them as having zero real value.
They’re a lottery ticket.
COULD they be worth something in the future? Sure. But statistics says almost certainly not.
If you don’t have a controlling interest in the company, there is a nonzero chance that if your shares are ever worth something, that someone who does have control will adjust things so you end up with nothing.
Unless you find yourself in a position where the money doesn’t really matter, focusing on the salary would probably be the smart bet.
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It’s hard to give a recommendation without knowing much - what market will this be in (maybe don’t say that publicly…)? Will you be 1 of 2 equity holders or 1 of 20, and how many outside investors are there and what % are they taking? Will there be a focus on specific proprietary branding/production/etc IP or will it just be a cut/dry extraction business? Will there be cultivation/dispensary/etc ops included in this entity? Will the entity own the real estate? etc
Overall while getting equity is great I’d say (1) don’t overestimate your importance, and (2) most of the time it’s smart to take more $ and less equity as someone offering the reverse usually isn’t a great sign - this is a capital intensive business and if someone isn’t willing to pay market rate for their most critical employee they may not be good to pay suppliers/etc. If you won’t have a large hand in designing the facility, managing the buildout, acquiring equipment & managing those vendors, creating SOPs, helping with licensing, finding+interviewing+training employees etc, then don’t ask for 50% lol.
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Shares in a private entity are of very low value, assuming you have less than a controlling share, unless you have control over the bank accounts.
There are so many variables, the contracts you have, the operating agreement, shareholder agreements, all of those documents can determine whether you have a good or a bad deal. In the end, since it sounds like you haven’t gone into arrangements like this before, I’d recommend a contract that guarantees your pay and some sort of revenue share arrangement that’s vetted by a trusted attorney like others have mentioned. Better to do a revshare than any kind of stock agreement.
I would feel a bit differently if you were being granted partial ownership of patents, long term commercial contracts with large entities or other hard assets but this sounds like just another cannabis extraction business that is super unlikely to have a 2-5 year exit strategy where you can actually liquidate your stock.
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Thank you so much
Thanks, will proceed with caution
Thanks for the Headsup
Much appreciated
This guy want me to do most of the technical work including equipment acquiring, creating sops facility admin, etc. But already from the above comments i need to proceed with caution.
Am considering going the profit sharing route, i think for now its more favourrable for me than just being a shareholder.
He can also hire this out on indeed for 70-120k a year too.
And probably with people that have more experience with that specifically.
Chemistry degrees are cool and all but they don’t help you make better rosin
Make sure you agree on the metrics that determine profitability if you go this route.
Lots of way to make numbers say what you want.
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Rosin production is reserved solely for us idiots. If you want to make great rosin, eat paint chips and huff gas! Worked for me!
Now this might be a ‘pro strat’ but for post processing, switch up to a metallic oil based spraypaint - this is the head of rosin at Cookies
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In approaching any business proposition I always make certain that something is put on the table for me before I take the offer seriously. There are a lot of dreamers out there without two nickles to rub together and they can swallow up a lot of time if you let them
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On this one, the degree doesn’t matter, we are talking about striking a good deal only. Chances are very slim that he can hire on indeed. All i want are ideas on striking a good deal, degree or no degree. Thanks.
Thank you so much. Am going to ask him to draft the offer so that i deliberate on it.