Ask HN: Would you give equity to a strategic partner?

[brianlynn11]

I have a product targeted at young, single people who enjoys going out at night to party. Now I'm negotiating partnership with a top nightlife promotional group locally, who can provide us the cream of the crop, highly targeted users to build our initial user base. We deem this as necessary since our product requires network effects, so we need a big crowd upon launch.

My question is, if we offer equity in the company as their compensation, what might be some implications down the road? Would you ever do it?

Some I could think of are 1) a messy cap table that prevents us getting capital from VCs, and 2) if it was the wrong strategy and we end up pivoting, we have a shareholder who provides no value. What do you guys think? Appreciate it!

[paulsutter]

Best of all is to have a value proposition for them that benefits their core business. You eventually want all the promoters in the country driving users to you, now is a good time to figure out your value proposition to them.

Second best is to pay them for usage that they drive (think of them as a lead gen partner and pay them accordingly, maybe CPA).

Worst is equity. The reward will seem too remote to drive incentives, and they may even start to feel like co-owners with their own ideas about strategy.

[brianlynn11]

Thanks Paulsutter, agreed 100%. A repeatable way without having any of them being able to influence our decision making is the best bet.