| I was in a similar position a decade ago. I took the money and it worked out for my ambitions (a nice living running a small company). It is up to you to decide which path to pursue. In my case, there was an intermediary company and they loaned me the money needed to build the product and took it out of the future revenue. But a large company can advance you money or help you get a loan. Your job is to come up with a plan to do what they want and a price that makes it worth your time and ensures that you are around to support them in the future. Some things come to mind:
1. It is hard to keep the product generic if you are serving a large client. I couldn't do it.
It might be easier for you if the product lends itself to selling 'seats'. 2. Find out how established your sponsor is at the company before investing too much effort in this deal.
Have they made purchasing decisions like this? Who would have to sign off on this deal? Does it help
them with one of their top 3 goals for the year? Just because you are talking to someone from a big
company that doesn't mean they can actually write you a check.
3. Get a copy of their MSA (master services agreement) and make sure they not expecting ownership
for derived work.
4. Everything costs x3 and takes x2 as long as you think it will. Always does. Plan accordingly.
5. Don't hire a business guy to run the business. It's your baby -- change the diapers yourself. It
really isn't that hard and you can hire consultants to do finance and legal. If you need sales,
think lead-gen. You personally will close every sale at this scale.
6. Hire someone who's entire job is to do client management. Get someone good and pay them a lot.
Build that into your price.
I personally love the small businesses that the startup community looks down on as 'lifestyle' businesses. Most startups are like rock bands. They toil in obscurity and fail. And then you and your baby get sold for pennies to pay back the investors.... Assuming you want to go the small business route, figure out what you think you need to run the business if they were your only client. Convert the roadmap into full-time heads and estimate what it would take for them to hire about a generic consulting shop to recreate what you are doing from scratch. Make sure each head is $20K/mo. Add 50% as a buffer. Your biggest risk is underpricing. Then tell that you'd love to focus on them and it would cost you that amount to do it. Walk them through it. Talk about how it is less risky and faster to partner with you. See if it lines up with what they are willing to pay. They may ask for ownership. If they do, ask why they want it? Being the largest client gives them more control than a 10% stake. If they insist, offer a 10% stake for the price you quoted to build it and reduce the ongoing price by 30% because the investment replaces the 'buffer'. ... And a few more business/practical things that you might not know: 1. You need a C corp if you want to raise money. C corps are controlled by a board. An LLC is controlled
by a managing partner. You want one or the other and you don't have to spend a bunch of money to set it up.
On one business, I used generic paperwork from Techstars, Carta to manage the ownership, and a
registered agent to keep my government filings up-to-date. Took maybe 2 days and costs < $1K/year.
2. Once you get any scale, you have to pay yourself as an employee and report that as income. I think you
can get away with not claiming income at first but the IRS wants its share. Use a payroll service -- do
not write a check for labor directly, even your own.
3. If you have discrete chunks you can hand you, consultants can work. Finding good consultants is hard.
I personally favor direct hires because you get their full attention.
4. Make sure to have all employees/contractors sign an agreement that gives you clear ownership of the IP.
|
I would set your pricing around a proposed move to the US so you can ask for money at US labor prices. If the move doesn't work out, you've got the contract priced right at least. Or I would inflate the number of heads you think you need to get to the same place.
Make it low-risk for you. Make it worth your time even if the contact disappeared overnight because your sponsor gets fired. The easiest way to do that is charge enough that you always have a year of expenses in the bank.
The key point is to justify your costs against their costs to replicate and then get a contract that doesn't pay you for your time.