I want to thank you for all the help and advice you offer through this blog. I have been an avid follower for about 6 months now and the information is truly priceless. Its even more interesting given you have lived in London – where I reside. I'm currently working with a New York based tech startup in the middle of the search for series A funding and your blog has been brilliant in keeping us on the right track and your wisom is much better shared!! Many sincere thanks and keep it up. And make sure you say when you are next on the way to London…

I want to thank you for all the help and advice you offer through this blog. I have been an avid follower for about 6 months now and the information is truly priceless. Its even more interesting given you have lived in London – where I reside. I'm currently working with a New York based tech startup in the middle of the search for series A funding and your blog has been brilliant in keeping us on the right track and your wisom is much better shared!! Many sincere thanks and keep it up. And make sure you say when you are next on the way to London…

I want to thank you for all the help and advice you offer through this blog. I have been an avid follower for about 6 months now and the information is truly priceless. Its even more interesting given you have lived in London – where I reside. I'm currently working with a New York based tech startup in the middle of the search for series A funding and your blog has been brilliant in keeping us on the right track and your wisom is much better shared!! Many sincere thanks and keep it up. And make sure you say when you are next on the way to London…

Nice post. A few thoughts. I've taken the position in the past (http://www.vcdeallawyer.com/2010/01/14/if-you-p...) that if the service provided by the outside party is strategic enough and even possibly core to your business then the equity makes sense. Having been on both side of the fence on this issue, I would agree that the company asking for equity all too often does it out of fear that they'll “miss out and get blamed for not taking anything” versus having a real reason for wanting the equity. There's lots of variable that drive this issue.

I agree with your views on strategic investors (http://www.vcdeallawyer.com/2009/10/27/should-y...) .

Warrants are a great way to bridge the gap between no equity and having a service provider as a full-time stockholder. Most warrants don't get exercised until there is an imminent exit so you eliminate taking on an additional stockholder during that holding period. The downside is that companies sometimes go nuts with the warrants and their cap table looks amateurish.

I really like the regular meeting with the sponsor idea. All too often, companies fail to pro-actively manage these relationships and they end up giving up real equity for a partner that doesn't deliver.

Chris McDemus
http://www.vcdeallawyer.com

Nice post. A few thoughts. I've taken the position in the past (http://www.vcdeallawyer.com/2010/01/14/if-you-p...) that if the service provided by the outside party is strategic enough and even possibly core to your business then the equity makes sense. Having been on both side of the fence on this issue, I would agree that the company asking for equity all too often does it out of fear that they'll “miss out and get blamed for not taking anything” versus having a real reason for wanting the equity. There's lots of variable that drive this issue.

I agree with your views on strategic investors (http://www.vcdeallawyer.com/2009/10/27/should-y...) .

Warrants are a great way to bridge the gap between no equity and having a service provider as a full-time stockholder. Most warrants don't get exercised until there is an imminent exit so you eliminate taking on an additional stockholder during that holding period. The downside is that companies sometimes go nuts with the warrants and their cap table looks amateurish.

I really like the regular meeting with the sponsor idea. All too often, companies fail to pro-actively manage these relationships and they end up giving up real equity for a partner that doesn't deliver.

Chris McDemus
http://www.vcdeallawyer.com

What clarifications would you apply to an exchange of PBW's between partners at a similar business stage vs. growthco to bigco? I would see this as creating a shared risk/reward scenario vs. you are getting rich on our back.

Looking forward to reading more. Cheers, Scott @HowieSJ

Having worked for many startups selling/cooperating with BigCo, I totally agree with you (as one BigCo executive told me once: “common sense is not an employee in this company”), but the issue is to understand that Corporations dont take decisions, executives do, and they dont behave strangely, quite the opposite, they are highly predictable.

One important thing is to understand that the main decision driver for BigCo executives dealing with startups is fear, most of the time this is a huge problem, since in most of the BigCo's nobody gets a bonus for adopting a new technology from a great startup, but they can be punished if they fail.

And in the case you mention, they may even get “in trouble” for “being used by a small startup to grow and BigCo not getting part of the pie”, so typically these kind of deals are more like “covering their behinds”

What clarifications would you apply to an exchange of PBW's between partners at a similar business stage vs. growthco to bigco? I would see this as creating a shared risk/reward scenario vs. you are getting rich on our back.

Looking forward to reading more. Cheers, Scott @HowieSJ

Having worked for many startups selling/cooperating with BigCo, I totally agree with you (as one BigCo executive told me once: “common sense is not an employee in this company”), but the issue is to understand that Corporations dont take decisions, executives do, and they dont behave strangely, quite the opposite, they are highly predictable.

One important thing is to understand that the main decision driver for BigCo executives dealing with startups is fear, most of the time this is a huge problem, since in most of the BigCo's nobody gets a bonus for adopting a new technology from a great startup, but they can be punished if they fail.

And in the case you mention, they may even get “in trouble” for “being used by a small startup to grow and BigCo not getting part of the pie”, so typically these kind of deals are more like “covering their behinds”