So a friend was intro’d to a company. He secured a high-commission outsourced sales agreement with them to potentially sell their product.

They also asked him to try to raise their seed round.

He asked me for help closing a customer. And we agreed I would take 40% of the sales commission he gets for that company.

But the work is entirely on me.

Then I raised them their $1.4m seed round, and gave him 60% of the fees from that.

Now they want to raise $15m and I have now sourced a potential dozen customers.

I think there is no reason I should be paying my friend a commission. I am operating on my own leads, paying my own bills related to traveling to talk to these companies, there are no leads, no infrastructure, no reputation he is lending me to aid in my doing business. And I am going to raise the entirety of the $15m and think it would be ridiculous to give him $500k simply for having intro’d me 2 years ago to this company.

The one area he does bring a benefit is that the sales commission he negotiated is very high, so maybe negotiating to like 75/25 there makes sense. Because it’s more than what I would get at 100% commission of their other sales partnerships contracts.

What’s your advice/thoughts?

Thanks

  • jamesldavis1@alien.topOPBEnglish
    1·
    1 year ago

    Its not a tech venture. Its a physical product.

    The CEO tried to raise, he just didnt get good offers.

    I brought in 100% of the seed round.

    I will be bringing in 100% of the Series A.

    I will be sourcing all of the deals for my sales. No like platform or anything is provided to me. He negotiated a great sales commission contract under which I can operate, but I see a lot of disincentive to operate at 50% commission. I would pay him into perpetuity.

    As far as the finders fee, we did the same thing an IB would do. And we didn’t even take a cut of the deal. We took 8% of the value as equity in the company.