Finance · Equity

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

Alper Cakir

June 13th, 2014

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!


A-level teams with B-level ideas succeed. B-level teams with A-level ideas fail. This course provides a comprehensive roadmap for building a standout team, teaching everything from hiring to structure, compensation, and culture.

Tony Leonard Founder @nurseVersity @ptVersity | #500Strong (b16)

June 13th, 2014

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?

Anonymous

June 28th, 2014

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.

Tony Leonard Founder @nurseVersity @ptVersity | #500Strong (b16)

June 13th, 2014

Please describe your mutual definition of phantom equity ?

Alper Cakir

June 13th, 2014

...a number of Phantom Units as described here: http://en.wikipedia.org/wiki/Phantom_stock