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What are the pros and cons of "Phantom Stocks" for vendors/partners?

We are a startup, servicing mostly other startups (fakecrow.com). Recently we got offered some "Phantom Equity" from one of our clients in return for a discount on our services. It seems like it is a good option for the hiring company but is it good for us as a vendor? Thank you!


4 Replies

Tony Leonard
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Tony Leonard Entrepreneur
Founder @nurseVersity @ptVersity | #500Strong (b16)
Please describe your mutual definition of phantom equity ?
Alper Cakir
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Alper Cakir Entrepreneur • Advisor
CEO at Xtensio, Creative Director at Fake Crow
...a number of Phantom Units as described here:http://en.wikipedia.org/wiki/Phantom_stock
Tony Leonard
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Tony Leonard Entrepreneur
Founder @nurseVersity @ptVersity | #500Strong (b16)
In my opinion it all comes done to credibility. Your extending credit. Ask yourself the following: Would you make a personal loan to the same. Would you want to be partners with this individual? Could you not find other options?
Rand Strauss
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Rand Strauss Entrepreneur
Transforming politics and government, Visionary at PeopleCount.org
It seems like the only difference between phantom and real stock is the paperwork. I think one can have a few shareholders while keeping things simple, but more and there's more reporting required. So if the legal documents are good, go for it, if you can afford to do the work without receiving cash. The benefits are that you can say you have a customer and get their feedback and testimonials, plus payment later if they're successful.

Yes, it's just like extending credit, which is all many startups have. And, you may look at their long range plans, get them to the point where they qualify for funding, and put into the agreement that you get a certain amount of cash at that point.
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