A beautiful example that business CAN be made simple and sweet:
“But first, there are a million ways to spin-off a company. And most of them are fucking complicated. Complicated stuff is anathema to us at Basecamp, so anything messy, extensively lawyer-y, protracted, knotty, or otherwise elaborate was off the table. So what was simple?
… So we decided to give Claire half of it. We’d own 50%, she’d own 50%. Her 50% wouldn’t cost her anything.
We wanted her, she was up for the challenge, and the money that she would have to normally come up with to buy-in wasn’t an amount that mattered enough to us to put any hurdles in the way of making it happen. Plus, we didn’t have to mess around with silly valuations either. Why complicate things?
We’d maintain that 50/50 partnership until she generated $1,000,000 in new sales. It could take 3 weeks, it could take 3 months, it could take 3 years. The $1,000,000 was cumulative — she’d hit it whenever she hit it. And when she did, we’d flip the partnership in her favor. She’d now own 75%, and we’d own 25%. And that’s how it would run in perpetuity.”
The source post includes the actual term sheet:
