Rollover equity
Rollover equity is the founder's reinvestment of part of the proceeds into the new ownership entity.
In a sale
When does rolling equity make sense?
Rolling equity makes sense when the founder believes in the buyer's plan and has already covered the number they need, because rollover equity is a bet on the buyer; it is a mistake when it is rolled only because the buyer asked. Its size, and the rights that come with it, are best negotiated before exclusivity.
Where it comes up
Read it in context
In the articles
- Where founders leave money on the tableMost of what founders lose in a sale is lost in their own decisions, and each one has a fix.
- What an LOI is really sayingThe headline is one term of nine. Here are the other eight.
- The second biteIn the right recap, the second sale is larger than the first. In the wrong one, it is zero.
- Strategic, platform, add-on, sponsor: who buys whatDifferent buyers pay for different things. The process should include several.
- Structure is priceTwo offers with the same headline can differ by millions in what you keep.
In The FNDRS Playbook
- PB07 The buyer archetype gridDifferent buyers pay for different things. Pick the ones who pay for what you have.
- PB13 Headline vs. take-homeTwo offers with the same headline can differ by millions in what you keep.
- PB14 The consideration stackPurchase price is a stack of layers with different certainty and different timing.
- PB15 The certainty curveStructure trades certainty for upside. Know where you want to sit.
- PB17 The rollover decision matrixRoll equity when you trust the buyer and do not need the cash.
See the terms with your own numbers
The Go-To-Market Analysis (GTMA) builds the file a buyer would build on your business, before a buyer does.