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Should I give up 50% of my company to a digital marketing agency to sell my service?

I have created a website, offering B2B service. It is a marketing platform, which enables businesses reach to their existing customers' friends.
I need to sell the service and I met with couple of smart online marketers, which have an agency and they want to become partners, requesting 50% equity in my company.
The product is live and done for this iteration of functionality. I was full time on the project until about a month ago, but hit the end of my runway, before being able to sell to real clients. I have 2 deployments, which were more of test users, not real clients. The goal was to gather data and test the service in real locations.
I am no longer full time on my startup, took on a job to cover expenses. Which means I can't dedicate as much time as I would have to or wanted to.
Any advice is welcome. I would also appreciate to receive ideas on how to structure the schedule for obtaining equity and in fact, how much equity sounds reasonable. To me 50% at this stage sounds way too much. But based on the fact I can't be 100% into marketing of my product, this may be the make-it-or-lose-it moment...
Thanks!

37 Replies

Anat Baron
0
4
Anat Baron Entrepreneur
Entrepreneur, Keynote Speaker, Filmmaker, Disruptor, Problem Solver, Human Sponge and Creative Thinker
Me too Was in car walking over now Sent from Mr. Big, my iPhone 6 Plus Apologies for any typos
Adam Gelles
1
0
Adam Gelles Entrepreneur
Principal at Marketing 2 Marketers
50% seems high to me. There are lots of JV biz dev folks out there that can do this @ substantially less.
8
0
X
Entrepreneur
I would structure it heavily in favor of sales commissions and add a largely symbolic amount of equity. I'd also offer more equity as a strategic investment, i.e. they'd have to buy it as an angel would.
Gillian Muessig
3
0
Gillian Muessig Entrepreneur
COO, Board Chair at brettapproved, Inc.
Half of something is better than all of nothing. But 50% for marketing would indicate that the value of all the other components of a business are collectively equal to marketing's share. It doesn't work that way. In general, 20% of a company's capital is spent to aggressively introduce and market a product. The company asking for 50% isn't the only marketing company on the planet. Now that you know what needs to be done, find others who do this work and negotiate a deal with a team that believes in what you're doing and is wiling to do it for a reasonable sum. You aren't paying that 20% in cash, so there WILL be a 'surcharge'. Make it a reasonable one. Gillian Muessig Outlines Venture Group C: +[removed to protect privacy] S: gmuessig @SEOmom
Andre Fox Wilson Sr.
0
0
Andre Fox Wilson Sr. Entrepreneur
Managing Partner | Business Funding
What are milestones set to determine suucess for sweat equity? Do they plan to take you to a level of sales that will make you self funded for a significant period of time? 50% seems excessive, however; if there are measurements to validate success and will return you significant sales to bypass seed funding, consider given circumstances. Who will execute sales? If you are working may not be effective.
Richard Reed
4
0
Richard Reed Entrepreneur • Advisor
Director of Marketing at Labdoor
I couldn't agree with Gillian more strongly. There are other groups to partner with that will have less onerous terms. Once you give up majority control of your venture, you will also lose control of it's roadmap. I suggest you like at valuations of comparable ventures at your stage, and then determine what the fair market value of the marketing/biz dev services you need would equate to in dollars. That will give you an approximation of a type of equity grant may make sense, which should also be performance based in the event that the other party is unsuccessful for whatever reason. For example, if your company has a valuation of let's say $1M, what would the value of the marketing/biz dev services be? I am guessing without having any particulars that it would be less than raising a seed round of financing so you would likely be looking at somewhere in the 5-20% range (assuming the above valuation). If this approach makes sense, you may wish to pursue angel investors who have marketing or biz dev backgrounds who may be able to contribute both capital and expertise in this area.
Josh McCormack
2
0
Josh McCormack Advisor
Owner, InteractiveQA - Marketing, Web Dev, Testing, Data & Market Analysis
50% is a lot if a partner does nothing for the business. If they turned a project of mine into a $100 million business, it would be worth it. Could you give them an option for up to 50% of the company based on performance concluding a year from now? Do $x of business, get 50%. Do $y, you'll get 25%.
Dawn Michelle Wilson
3
0
Dawn Michelle Wilson Entrepreneur
CEO & Chief Brand Strategist
I've spent my career in marketing and sales. To receive 50% equity in a business means we would have to deliver big time. I agree with others above, you would need to have very clear, specific performance options that related to equity. The reality with marketing and sales is even the best laid plans don't always work and if they don't, you've given up 50% of your business. That is a high risk.
Renan Prado
0
0
Renan Prado Entrepreneur
Employer Branding na Natura Cosméticos
Hi Nickolay, this price is too high! 50% of your business in a early stage is not strategic, even more if you think to reach for rounds of investment. The best strategy in this case is to make a proposal for a success fee.Based on the number of sell made by this company you pay them a X% of the revenue. This is more strategic because you preserve your equity and engage your "partner" to try always to sell more1
David Albert
2
0
David Albert Entrepreneur • Advisor
Founder & Principal at GreyGoo
50% is high for a product that's already baked. I would grant equity based on a milestone schedule--start small (10%? 15%?) and grant equity based on hitting milestones - 90 days, 6 months, 1 year. If the company can achieve what they claim, they should have no problem agreeing to this. Couple it with commission and/or royalties to give them some cash along the way and reduce the amount of equity they feel they are entitled to. It sounds like you have a product that can be monetized quickly so if they can on-board new clients, a revenue share should be able to offset giving away pure equity.
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