Ask the Collective
The questions independent drinks founders ask most — answered. Distilled from years of community knowledge so the good stuff never disappears in the feed again.
How should an option pool be structured when raising capital—should new shares be created, or should the pool come from founder shares?
When setting up an option pool, **new shares should be created** to dilute the whole company pro-rata, rather than coming from founder shares alone. This is market standard practice. **Key principles:** - New shares dilute everyone proportionally—all shareholders (founders, existing investors, employees) take the dilution, not just founders - This applies unless your Shareholder Agreement or Articles of Association explicitly contain non-dilution clauses, which are rare outside of specific anti-dilution protections in investment rounds - Option pools are typically **excluded from anti-dilution top-ups**, meaning everyone dilutes pro-rata when the pool is created - If your Articles or legal docs specify that one person takes the full hit, that would be non-standard and should be reviewed **Tax-efficient route in the UK:** - Consider setting up an **EMI (Enterprise Management Incentives) share option scheme**, which offers tax efficiency for employees. See: https://www.gov.uk/tax-employee-share-schemes/company-share-option-plan **What members did:** - Several members set up their option pools to dilute everyone proportionally when established - One member noted that an investor/board member pushing for founder-only dilution was incorrect—this runs counter to 10 years of VC market practice **Caveat:** If your SHA or investment docs include specific non-dilution or anti-dilution clauses, review them carefully—but standard practice is pro-rata dilution for option pool creation.
What should a founder service agreement include, and how should founders approach negotiating one?
A founder service agreement typically needs to cover equity, corporate governance, intellectual property (IP), restrictive covenants, and confidentiality clauses. Members report these agreements are often required by investors as part of funding conditions. Key considerations members raised: - **Scope**: The agreement should address equity earnings, governance rights, IP ownership, restrictive covenants (e.g., non-compete clauses preventing you from starting a rival company simultaneously), and confidentiality obligations. - **Caution on over-signing**: One experienced member advised "not to sign one at all, or have the most basic employment contract possible," suggesting founders should be cautious about overly restrictive terms. - **Timing**: Founders should prioritise tidying up these agreements before final funding tranches are released, as investors often make this a condition of payment. The community did not share a specific template in this discussion, though members indicated willingness to source one from their networks. No specific legal firms or template providers were named.
What's the best way to issue shares to employees and investors without hiring a full legal firm?
Members recommend using **Seedlegals** rather than attempting equity issuance entirely solo. Seedlegals is a platform that automates much of the legal work, costs around £58, and is built around qualified legal counsel—their account managers can run unclear points by lawyers within their team, removing thousands of pounds in traditional legal fees. However, members strongly advise against going completely "hands solo" without any legal oversight. The consensus is that while Seedlegals provides a cost-effective middle ground with professional backing, having some qualified legal input is essential to ensure equity structures are properly documented and in the right place for future scenarios (good or bad). As one member put it: "Couldn't recommend highly enough!"
What share classes should founders offer to first-round investors?
Members typically recommend issuing **Ordinary B shares** to first-round investors, rather than standard Ordinary shares, particularly when you want to retain control and differentiate investor rights from founder shares. **Key structure recommendations:** - **Ordinary B shares** — the standard approach for first-round investors; provides flexibility on voting rights depending on investment size and negotiation - **Founder shares with double voting rights** — give yourself enhanced voting control even if investors hold a significant equity stake; multiple members endorsed this approach to maintain decision-making authority **Consideration:** The choice between voting and non-voting B shares depends on how much the investor is committing and your preference for governance control. Members did not elaborate extensively on non-voting structures, suggesting voting rights are the norm in early rounds.
What compensation structure should early-stage drinks businesses offer to non-executive board directors—cash, equity, or a mix?
Early-stage drinks founders should structure non-executive director (NED) compensation based on business stage and the specific value you need them to provide. **Stage-dependent approach:** - **Early stage**: Equity-only compensation is the standard expectation. NEDs should be willing to take stock options rather than cash, ensuring they are vested in the business's success and aligned with founders. - **Later stage**: As the business matures and generates revenue, cash compensation becomes appropriate alongside or instead of equity. **Key principles members recommend:** - **Define the role first**: Be clear about what you actually need from the NED (strategic advice, sector connections, operational expertise, etc.) and recruit accordingly. Compensation should reflect that scope. - **Consider investment**: One member suggested asking prospective NEDs to invest their own capital in the business, which strengthens alignment and commitment. **Finding NEDs:** - Members recommend specialist recruiter **Nurole** as one option for identifying non-executive candidates in the UK, though other recruiters exist in this space. - The broader Kindred Collective membership itself may contain potential NED candidates with relevant experience. **Caveat**: The exact split between equity and cash, vesting schedules, and role scope should be worked out case-by-case. Members recommend discussing specifics one-to-one if you need deeper guidance.