Question
Hi! I have a potential investor express interest in investing a substantial portion of our seed round. However, part of the deal would be that I would have to pay him back half of the investment amount in case the startup does not succeed. Is this a common practice, and if so, what should I pay attention to legally?
Answers: 1 public & 2 private
Every deal is a little different. While promissory notes are fairly common in financing agreements, the point of being a seed round investor is the risk v. reward. If the investor is trying to limit 50% of his risk, the potential reward should be greatly reduced. Also, if you can afford to repay 50% of the investment if the company fails yourself, why not invest that money now?
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