I am building a marketplace that is composed of bloggers and writers as the supply side of the marketplace. My target is to acquire at least 400 of them before Sept 2015. My idea is to offer stock options to the first 5 (say 5000 shares each out of a million shares of the company). I can ask them to bring another 20 bloggers each, to whom I can award 500 shares each. The rest of the later bloggers will have 100% return on revenue generated by them in the first 3 months after the launch. Can anybody help me refine my intuition? Thanks!
Here are my thoughts:
"Offering stock options to the first 5". We tested this and it turns out this isn't viable. Not only will you administrative overhead managing your cap table, you're going to turn off investors that may not like the structure.
My advice is: keep it simple.
1. Define your customer persona
2. Contact them and find 10 of them to say yes
3. After you have validated demand, find the supply to fulfill the demand.
4. Create a few success stories.
5. Rinse and repeat.
Bloggers/writers primarily want to have a dependable source of supplemental income. If you can do that, while making the experience enjoyable, you'll be on to something.
Equity does not work in this type of scenario. Equity is the most expensive way to pay someone for you as the owner. For the recipient the value is 0 and the possibility it could be worth something more is not going to motivate them unless you have had a previous exit which would make it far more compelling.
If you are trying to build something like Contently. My suggestion would be:
1. Find a company that wants to create and implement a content marketing strategy
2. Find a writer/s that meets the requirement
3. Post the writing
4. See if you surpass the clients goals
5. Measure your success
6. Repeat 1-6
Eventually you make move into a marketplace model like Contently.
Just my two cents.
Writers write for various reasons:
Mercenaries ... for money;
Marketers ... for publicity;
Narcissists ... for vanity;
Intellectuals ... for curiosity;
Activists ... for influence.
In any of one of us, these motives are mixed in varying proportions.
Stock options target the first of these. But it's just not very enticing. Why would a mercenary work for a deferred payment that's so uncertain when cash jobs are all over the place? Also, once a writer has signed up for a piece of your pie, their incentive is to let other writers contribute while they sit back and wait for a reward.
Nah. Look at the other motives.