claim candidate goes to: this-edition T town planner
What breaks: EIS is lost on bought shares, a big early sale reads as doubt, the founder-lender is a creditor, and a broad non-compete closes the fork
The model has costs a founder should know before the term sheet does. UK angels get EIS relief of 30% and SEIS of 50% only on newly issued shares, so bought shares are that much dearer to them; expect a lower price or a hybrid with some new shares. Common stock is often priced 10% to 30% below the last round. Balderton says it would not expect a founder to sell more than 10% at growth stage and has walked away over the size of a secondary. A founder who sells and lends back has moved part of their risk ahead of the new investors unless the loan is subordinated in writing. Control can return through a shareholders' agreement, and the model only holds if the founder refuses those terms. And refuse a broad non-compete: it keeps the fork for the investors and takes it from the founder; offer confidentiality, no poaching and no use of the brand instead.
Decided by. Nobody yet: a candidate for Dinis to read, comment on and decide (keep, rewrite, merge, cut, article first, later, not doing it).
Note. Fits badly: deep tech, hardware, a land grab against funded rivals, proprietary code (no fork), investors whose model needs control rights. The UK figures are for 2026/27; the EY secondary pricing data is from Indian deals; the UK's 2023 plan to cap non-competes at three months was never legislated. Four fine-print points for a lawyer are in the article: transfer restrictions, selling above market value as employment income, success-linked interest treated as a distribution, and the order of issue and sale in a hybrid.
Where it comes from
- Sell, don't issue What breaks; When it works and when it does not (newsroom)
What it answers in the 2018 book
- Be a founder answered written, Life Patterns
Where it goes
Chapter Fund it, or do not, part Start the company (drafting); topic Be a founder (or a one-person service).
Other ideas proposed for the same chapter: Fund it, or do not: the worst time to raise is before you are profitable, and the best is when they call you, We study survivors: a risky practice can look like the cause of success when only winners are counted, Investors select for the founder they can steer; control is written into the contract, and founders get replaced, Sell, don't issue: the investor buys the founder's shares, the founder lends the company what it needs, and nobody buys the steering wheel, Europe's slower, sceptical money suits a founder who can build first.
Node idea:what-breaks-when-you-sell-not-issue in graph.json; see it in the graph. Source: admin/content/graph/ideas.json.