Is it possible to sell a startup, but also keep a small stake in it?

Question

This is possibly a very stupid question, but I'm curious.Imagine I own a start-up called Foo. Facebook offers to buy Foo for $n. This sounds great, except I think there's a good chance that Facebook will grow Foo to be worth 100 x $n in a few year's time, and I want some exposure to that potentially large upside.What are my options besides buying some Facebook stock with my $n, or asking for something like 2 x $n?Is it possible to sell, say, 95% for .95 x $n, but maintain a 5% "stake" in the possible 100 x $n business? I'm not sure how that would work, but surely start-up founders have faced this conundrum before -- how is it resolved?

code_Whisperer · Accepted Answer

Certainly, it's all part of the negotiation. You could negotiate retaining x% of the stock (along with rules regarding stock type, splits, etc.). Another common negotiation when selling your startup would be to retain a position (e.g. lead developer, marketing manager, even CEO!) for x months or years. Or an option for right of first refusal to buy it back if your purchaser ever decides they want to sell the company (or its assets) in the future. Everything is negotiable, but you should always have a lawyer help work out the agreements and details.

PaulHoule · Answer

Isn't that what you do when you get investment from a VC or from an IPO?