Forums: Discussions for entrepreneurs and small business.

Hi,

 

I am starting up a new website and am bootstrapping.  Forgive me if this topic comes up a lot (I searched to no avail).  Since I am using limited start-up capital I want to give equity to the site-developer and sales guys ( hopefully will only need 2 partners pre-cash flow). Is there any popular way to structure this? Any blue print out there?

I have no idea what percentage of equity to give (I want to maintain control) or caveats to add. I have just started my search and will piece everything together If I have to , but I figured that maybe someone has already done so.

All stories welcomed good or bad.

 

 

As someone who is partnered in various ways with well over 20 people currently, I can honestly say that there is no "standard."

In the long run, you give as much (and only as much) as you have to, to get what you need to move forward.

I gave half of one business away to get the legal assistance I needed to move forward, otherwise it would have stalled. It's WELL worth it, because half of something is better than 0% of nothing. *smiles*

That same business has a third partner on spec. If she comes in, she will get 20%, 10% from each current partner's share. If she does not come in, we will part ways, owing a  salary equal to $35,000/year for the time she worked, once money has been made.

Other partnerships are simpler, some more complex. For example, with my licensees, they only owe me once they start making money. Once they do, I get a percentage that starts high and goes down based on gross income per month.

However you choose to do it, get a good legal agreement in place. Otherwise, it can become a nightmare.

Thanks for the reply.  I will also be launching a web based business.  I am not familiar with how much a starting programmer should be vested with, as I see them as a vital part of getting the company off the ground, and I don't want them to feel like they are being ripped off.  20 partners!  Where are you finding your partners?

tell me more about your project, maybe i will be your partner.

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For obvious reasons I can't say to much. But there will be recurring income from memberships and low start-up costs. Only 1 direct competitor is operating in the same space.

membership sites or user generated content sites perform pretty well nowadays. run ads and take all the profit. haha

 

 

 

 

 

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I've been through this many times, and every time you come to the same conclusion - DON'T DO EQUITY PARTNERS.

You won't find very qualified people by offering equity in your great idea - as great programmers are asked to do "equity partnerships" almost every day, everyone we know has a "great idea" but just needs a programmer, sales person, graphic artist, etc. to do all the work for them.

And NO equity partner will ever put the love in that you would or a paid employee would.  They'll "get it done next week" for 6 months.

You are far better off saving some money and hiring an overseas programmer as you can afford, or simply look for investors and use their investment capital to hire the right staff.

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