Understanding Founding Partner
Are you looking for an article that has all the information about the founding partner? If yes, then finally your search is over. In this article, you will get all the information regarding the founding partner. And some of the frequently asked questions regarding the founding partner are also mentioned. So if this sounds interesting, then keep reading this article. Now without wasting any time, let’s jump into the main deal.
What is a Founding Partner?
Founding director definition : Founding partner is a term that used to characterize the shareholders of an organization, firm, or company, which is sold to an equity-backed platform company on the very first roll-up. The normal procedure is that the platform company follows is the purchasing of a large organization that has strong people in the management area and powerful infrastructure, the bolt-on acquisitions are added after that. Before the occurrence of the price change in the stocks and mergers, the first entity shareholders or you can say, people who have bought the stocks in the initial big company, known as founding partners.
Understanding Roll-up and Bolt-on Acquisitions
Though the basic definition is mentioned above, but you will have to understand roll-up and bolt-up terms first, if you want to get a better idea about founding partners. When different small companies collaborate or collide together, then a bigger company is formed, considered as a roll-up. Generally when the market place is fragmented and all the similar companies, which compete do not have adequate means and resources to dominate or stand up alone in the market, then roll-ups happen. It is also known as consolidation. In majority of the cases, the first to initiate a roll-up is a bigger company that has an important role in market. This bigger company works with a private equity firm and rolls-up with the other low scale firms or companies, trading the same services and products.
After that, for the growth and to dominate the market and to expand the presence of the company in the market, bolt-on acquisitions are added to the larger company (platform). Generally, all the other small companies that have products and services and the small companies that are already consolidated are chosen by the private equity company, which started the consolidation. All the small companies that want to grow in the market but have limited means are bolt-on acquisitions. Though these companies have limited resources but they can offer geographical divarication or technological benefit to the main platform company.
Founding Partner Expansion
One of the most important things during a roll-up is that the shareholders must get in at the ground level. When the founding partners purchase the stocks at the original or initial price, then it is known as being on board soon or early. Due to the late joining, the bolt-on companies’ shareholders get the stock at a higher price as the firm starts growing and the stock prices increases. If the platform company dominates the market, everything in the roll-up process flows in a smooth manner and shares are revalued higher by the private equity company, then prices of the stock of the entire company increases.
It also indicates that the founding partner will also see less dilution to their own stock’s value. When the company does more transaction and with each finalized acquisition, less high-value stocks are required with each deal. Another important thing is that together with the benefits of increased stock valuation, it is also possible that founding partners can also hold a position in the management section or team. And founding partners can also sometimes fill the board seats in the platform company. At last, it is very beneficial to be a founding partner both in terms of placement and finance.
Some Frequently Asked Questions
So after covering all the fundamental information regarding founding partner, it’s time to answer some of the most asked questions:
1- How to Find a Founder Partner?
If you want to find a founder partner, then here are some ways that you can try:
• You should attend entrepreneurial meet-ups
• You can also join online groups on LinkedIn or Facebook
• Start with your friends and family
2- Difference between Co-founder and Founding Partner?
The main difference is that a co-founder is a person that is in the business from its very starting days and the founding partner is a co-founder of a partnership that is structured like a law firm or any other company.
3. Founding partner vs managing partner
Founding partner can be managing partner. The managing partner has two main roles: working as a partner (founding partner) doing business, and as the general manager. Difference is in roles because managing partner has one more additional task – to do day to day activities, manage. There are difference in payment too – founding partner will receive a distributive share of the partnership income every year and managing partner will get additional guaranteed payment, for management duties for the partnership.
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