the startups.com platform about startups.comCheck out the new Startups.com - A Comprehensive Startup University
Education
Planning
Mentors
Funding
Customers
Assistants
Clarity
Categories
Business
Sales & Marketing
Funding
Product & Design
Technology
Skills & Management
Industries
Other
Business
Career Advice
Branding
Financial Consulting
Customer Engagement
Strategy
Sectors
Getting Started
Human Resources
Business Development
Legal
Other
Sales & Marketing
Social Media Marketing
Search Engine Optimization
Public Relations
Branding
Publishing
Inbound Marketing
Email Marketing
Copywriting
Growth Strategy
Search Engine Marketing
Sales & Lead Generation
Advertising
Other
Funding
Crowdfunding
Kickstarter
Venture Capital
Finance
Bootstrapping
Nonprofit
Other
Product & Design
Identity
User Experience
Lean Startup
Product Management
Metrics & Analytics
Other
Technology
WordPress
Software Development
Mobile
Ruby
CRM
Innovation
Cloud
Other
Skills & Management
Productivity
Entrepreneurship
Public Speaking
Leadership
Coaching
Other
Industries
SaaS
E-commerce
Education
Real Estate
Restaurant & Retail
Marketplaces
Nonprofit
Other
Dashboard
Browse Search
Answers
Calls
Inbox
Sign Up Log In

Loading...

Share Answer

Menu
Advertising: Shall a startup seek funding (services-for-stock deals) directly from service providers, instead of or in addition to seeking cash from VCs?
TW
TW
Tom Williams, Clarity's top expert on all things startup answered:

It depends on the potential for growth of valuation in your business. If 5 years from now, you think you think "moderate" success is most likely (a few million in ARR as a Saas business as just one example), then using your equity to buy services might actually be *worth* it.

But if you're pursuing a fast-growth, VC backed business where you aim to create a 50x return (minimum) on your current valuation, then spending on services with equity is really not advisable, or at the very least, I'd recommend you do it very sparingly.

I would also say that the absolute maximum in a venture backed business that is tolerable for a good cap table would be 8%. Tipping beyond that leads to a messy cap table and lots of small share holders, which you generally want to avoid.

Finally, I'd be sure to get your Service Level Agreements really nailed. Meaning, you want them to commit to a minimum number of hours that equates to the right valuation, and have provisions for these shares to be canceled in the case that you dismiss them before they create full value.

Happy to talk this through in more contextual detail to your business in a call.

Talk to Tom Upvote • Share
•••
Share Report

Answer URL

Share Question

  • Share on Twitter
  • Share on LinkedIn
  • Share on Facebook
  • Share on Google+
  • Share by email
About
  • How it Works
  • Success Stories
Experts
  • Become an Expert
  • Find an Expert
Answers
  • Ask a Question
  • Recent Answers
Support
  • Help
  • Terms of Service
Follow

the startups.com platform

Startups Education
Startup Planning
Access Mentors
Secure Funding
Reach Customers
Virtual Assistants

Copyright © 2025 Startups.com. All rights reserved.