Equity · Partnerships

Would you accept an offer based on equity from person from other country?

Eran Yasso

June 9th, 2016


From time to time receive partnership offers from people in another country.
They ask me to do a job for an initiative they want to start and as a reward they offer me equity.

The job is doesn't matter, it can be business model to develop, UI UX design, or software development to do (in my case which can be either a mobile app, embedded SW, C# app),

You all know how hard it is especially if you are already employed in full time job but in your free time, especially at evening
you work on the initiative already belong to or not.

The problem is that I am afraid that once i supply the product, they will run away. If it is in my country, it will be easily to track them
and make them pay (legal only). However, in an other country this is a different and more complex story.

What would you do?


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Reuven Granot Corporate Strategic and Scientific Officer at Perlis Ltd

June 9th, 2016

Hi Eran,

Make partnerships only with people you trust. Sometimes you may be disappointed, but at least you should know with whom you decided to enter in business. Equities from a Start-Up are with minimal, almost no value but they may be of real value only if you continue working with this company. Do you believe in their product? If it is just one time outsourcing, ask (you can these days have phone calls for free) them about plans and expect to take a leading position in the new company.

I am giving you this advice even that myself founded a start-up a few years ago and have a partner from Canada, who contributed what I thought is valuable for us. I care about this connection, continue informing him about what we plan and do and seriously consider his advises. I see him as a full partner, even his shares' value can't really count a lot at a shareholders' meeting. Of course, he is listed on formal Government documents and received written acknowledgement about his shares. 

Lester de Souza Building community for entrepreneurs

June 10th, 2016

Confirming advice above - partnership requires high level of trust in each other.  It is possible to structure the arrangement to limit the parties' exposure to each other but this requires taking steps up front.  On the back end it is more expensive and may be too late.

Max Garkavtsev CEO at QArea, TestFort

June 9th, 2016

Hello, Eran.

 

You can make some defensive arrangements like not supplying sources, or not transferring ownership for IP created until some trigger.

Another legal option is referring to international arbitration in your contracts (they can be enforced easily through borders of most of countries).

 

But realistically, even with basic contracts someone has ran away from you with sources means that the project was not that successful (because they will never be able to find serious investor having an open claim for their IP, even in another country).

So in best case everything will work, In worst - they will steal something what hardly worth stealing. The only real problem I can imagine in bad scenario is if it's your idea, they ran away and you are still bound by non-compete. 



Øivind Gunnufsen Founder at Entrepreneurial rEvolution

June 9th, 2016

I will develope a product that aim to handle these exhanges of services :) Mvh øivind Gunnufsen + 47 90888080

Michael Feder Founder and CEO at PrayerSpark; Finalist: Global Business & Interfaith Peace Award

June 10th, 2016

Best way to manage trust with folks you don't know is reputation. Check linkedin, and ask for references. You are basically "loaning" them your talent and skills and time for a promise of equity. Treat it as you would any other loan-  research, and don't be shy about asking. Once you find a person checks out-  ie, has verifiable references and a solid reputation, you can make your decision.

Giles Crouch Digital Behavioural Economist | Speaker | Writer | Technology Strategist | on Twitter @Webconomist

June 16th, 2016

For the most part I'd say no. It's easy to offer equity. It's a completely different situation when that equity suddenly has true cash value. When money comes in, the game changes and people don't like to share. All the above advice rings true.

If they don't have the money to pay you, it means they don't value your work. In addition, when it involves another country, share agreements are ruled by the laws of the country of origin, as a foreigner you may have very few rights if you need to take legal action and the costs will be enormous.