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If hmexx is looking for a cofounder the numbers make sense. If hmexx is creating an incubator they don't because there is no meat on the bone at 50% equity. The founder has no way of getting more runway without becoming a minority shareholder - there aren't any good choices once the $5000 is gone.

Maybe, hmexx has structured his offer without considering the ramifications of 50% stake as an incubator. I'm somewhat inclined to give the benefit of the doubt. No level of ethical intensions makes 50% equity make sense either for entering or accepting a project into an incubator.

50% equity is what investors demand to keep an enterprise from dying. Flowers are appropriate for a first date.



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You're missing out on the 3rd option: hmexx could gamble 100K, do 12 of these and finally pick the one winner to spend all the rest of his time on and drop the rest.

And of course the founder has a way of getting more runway without becoming a minority shareholder: put more money in.


Yes, and it's the third option that raises the question, does hmexx retain 50% ownership of the other 11 projects? If so, those founders are married to a disinterested partner with veto power.

If hmexx can conjure traction with $3k and little further effort, then entry into his incubator could make sense, even for a person with the resources to develop the project on their own, at least from the standpoint of logical possibility.

Is it good for hmexx's investment to structure a deal likely to produce problems for the counterparty after two months? I guess that depends on whether one believes that fast failures should be total and lead to abandonment or partial leading to adjustment.

A safe strategy for the counterparty to hmexx's incubator option is to produce a minimum MVP and go passive, letting hmexx do all the heavy lifting if he wants to move the project forward.

What I see is that a 50-50 incubator split doesn't align with the interests of either party. It disincentivizes the developer from seeking to raise outside capital, and should the developer choose to pursue outside capital, the developer must use some of his limited runway to do so.

It seems to me that the sorts of developers for whom hmexx's offer is most appealing are those less likely to raise additional capital on their own - i.e. if they were able to raise capital on their own, they might not need hmexx (a talent which conjures traction for $3000, aside).

If hmexx's role includes providing the additional capital investment after runway, then the deal is actually structured to give him majority control. If hmexx's role includes raising capital from third parties, then he is going wind up a minority shareholder anyway, so why not maximize the incentive for the active developer to develop?


If my idea (and development) turns into a multi-million dollar proposition and I get booted to the curb, I'll give you my phone number for $8000 so you can offer to invest in my next venture. But I don't guarantee I'll return your call, because my phone will be ringing off the hook.

If I fail, I'll get another job after a couple months and do it again.


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