Having gone without a lot of things to get our business off the ground and now looking at bringing in others as partners the idea of then raising capital just to pay significant upfront salaries seems like it will add stress from the expectations of the investors. So is it unreasonable to expect new incoming partners to sacrifice a bit to share in future rewards ?
Kimberly, My thoughts are that if you don’t pay upfront, you better be prepared to offer respectable portion of equity, or you are not going to attract anyone good. Put in to a story of funding a movie which is one of the most intense forms of entrepreneurship: Several years ago, a man who was friends with a local billionaire business man wanted me to meet a mutual friend who wanted to make movies. The man was one of these socialites that was worth several million probably pretending he was worth a lot more…and leaching to the billionaire to gain social standing. He was a complete novice with movies, and acted more like a trust fund baby who had never worked a day in his life. But he wanted to make a $30M budgeted film based on the book of a friend of his. He said he wanted Brad Pitt or Matt Damon to act in it..bankable actors most of the time..so that was good. Then he got to the part about how he would pay to have the screenplay written from the book. He said, “We will just find some screenwriter and pay him $10,000 dollars.” And that was when I knew he knew absolutely nothing about what he was doing. So I asked him, “Just one question. Who is writer who will write a screenplay that matt damon or brad pitt will act in that a director will direct..who will write a screenplay based on a best selling book…for $10k??” Silence. And clearly he was a ___(fill in the blank) and had not thought ANY part of the process out or written a proper business plan. Now sadly, at the time I was dealing with one of Brad Pitt’s agents, and my business partner had actually given Matt Damon’s agent his start in the agency business so I could have easily put together with funding. What could have been a successful project never got off the ground because this guy thought he could cut corners and attract the level of talent he needed for $10k. Which in reality, when I talked to Pitts agent about it, the starting point was $500k for the writer which is exactly what I told the guy. So in other words: If you can’t afford to pay..you cant…if that’s all you have to work with then you gotta sell them on the quality of the project/company. And you have to put a nice chunk of equity on the table. Lot harder to get things going that way, but drive and dedication do have value. But if you have had success or are hanging out on yachts and then try to low ball people you will depend on….its just not going to build the type of trust or loyalty any startup needs to have success. No one you need cares about you “going without” Why?, because everyone who can help you..who has developed enough grit and knowhow, has also sacrificed. So again they are going to want to see salary and equity. And the size of equity will depend on the size of the salary.
Thanks for replying and I totally get where you are coming from.
My story is complex as I had this time last year an ex wall street banker on board as a COO and he and his old boss committed to invest and then he had a complete melt down when his funds from the sale of a old business were frozen trying to exit from the US.
Who knows the full postion but it left me mid way through implementing a business plan and trying to do all the key things myself.
I have approached a few places looking for investors but they think I am to early although the nature of what I want to do is something that will not require round after round of capital.
So the first round of capital raising will be the last but more importantly is connecting with the right skillsets. I am looking for the right person to progress our website but what we call phase one is not that complex so am not looking for a massive input and are I think offering a very generous position for the right people as we are about to add two more destination countries to our offering so most of the work I will be doing.
But also part of our story is our commitment to give back and I just spent 5 weeks living at a school in Phnom Penh helping them and this included helphing build, clean and what ever else I could do. We are helping set up a training centre in Hospitality and Tourism but by western standards it was pretty confronting.
i will go back and continue this work as it is life changing for the 150 plu students but it got me wondering what people are prepared to do to take there business forward.