Ask HN: Approached by BD guy who wants to help - what next? | Hacker News Reader

Ask HN: Approached by BD guy who wants to help - what next?

7 pointstixocloud15 comments

Hi HN-ers,

Hoping to hear your thoughts - we've been approached by a BD guy who wants to help us commercialize our technology in the hotel space. He claims that he has relationships/friendships to the top guys in the hotel chain industry. In exchange, he's looking for equity.

Has anyone ever had experience dealing with BD folks? Our challenge has been trying to get into the hotels and we could see how he could be useful but we're also wondering if it's better for us to do it ourselves?

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What's his goal here as far as position/future go? Does he want to move into a C-level position, or is he more keen to make some introductions and work as more of an advisor? Is he thinking full-time or part-time?

Based on what I've read, this doesn't seem very legit. It's easy to say that you have connections to x industry to get y% of equity in z startup. But, it's hard to deliver actual business, even if you have those connections.

Basically, bringing in the wrong person and giving out equity too soon is a recipe for disaster. Worst case scenario, you end up with an angry outsider on your cap table. I know that you said you're bootstrapped, but if you ever raise funds, an angry outsider on your cap table can royally fuck things up.

If I were in your shoes, I would treat this as a recruiting process for a CEO (even though you don't have $$$ to pay and presumably don't want him to be CEO). If you were hiring a CEO, you would check references, maybe send some cold contacts to former employers/co-workers (LinkedIn is amazing), and generally do a metric shit tonne of due diligence. If he is offended, run. Anyone who is qualified enough to work out in this kind of situation wouldn't hire himself based on what you've told us!!

Thanks.

He's most likely interested in some sort of exit within 18 months and he's open to being an advisor but also getting hands-on (which I really find interesting considering that he hasn't spent a ton of time knowing us yet) although he doesn't seem to think this would be a full-time gig.

The thing is - how can we break through the larger hotel chains if we're basically starting the relationship from scratch? My assumption is that the product would have to be really great and then potentially getting investors to help us open the door.

As a side note, who would I usually talk to about all these things? My team and I are still fairly greenfield - should we enlist some advisors to help guide us?

Set up milestones. If he hits those milestones, he gets pre-agreed upon tranches of equity. If he doesn't hit those milestones, he doesn't.

Not sure why this comment is on the bottom, but this is the most reasonable arrangement to me. Hot shot salesmen at paid on closed deals, not butt in seat time. Not even a vesting schedule makes sense here.

Give him a trial run first. hire as a freelancer (no equity but pay them an hourly/flat fee). If he can get you a few paying customers using his contacts and sales skills, then you could consider giving equity/partnership of some sort.

The thing is that anyone can claim to be anything. You need to ensure that they can actually deliver. Don't give equity and then find out. Find out before you give equity. Remember, equity means they own a percentage of your company possibly for a really long time.

We're bootstrapped at the moment - what could we do as an alternative to an hourly rate/flat fee?

I agree with your 2nd paragraph. That's what I'm worried about. Could we do something like vested equity? Where each deal we land will provide more equity? Or a sales commission of some sort?

Equity should always be vested. But I am not even sure if you should give them any equity until you know for sure that they are worth it. Even if he lands you 1 or 2 deals, how do you determine the equity (even if vested) just based on that ?

I am just a stranger on the internet so take my advice with a grain of salt. Based on what you said so far, it seems like you don't know this person well and you don't know anything about their track record. That is a huge red flag for me to even discuss equity. Too early.

If you are bootstrapped and money is tight, you could perhaps give him a commission on the first few sales (a fixed percentage of the sale per client etc) instead of equity. If he is really interested and worth it, he will agree. If not, then you are taking a big risk by agreeing on equity upfront without knowing anything about him and his ability to sell.

Thanks for the advice. I really appreciate it.

Can he provide any evidence that his relationships/friendships are real?

I remember an old post were they get a salesman for a few month, he never sold anything, and later asked for severance payment and equity. He was the viceprecident of something in the previous company. There was a funny detail that he left his special big chair in the office and never passed again to get it. I can't find the link now.

Get everything in writing and reviewed by YOUR lawyer. With an oral contracts is hard to be sure how bad it can be later.

I like the idea in a sibling comment of hiring him as a freelancer until he can prove he can sell something.

Thanks for the great advice about getting a lawyer. I think we may need one and put everything in writing before anything else.

On first glance his offer seems reasonable. He seems to believe in the potential of your technology as he's happy with equity alone, which is a good sign (provided he can deliver on his promise).

Your decision basically boils down to time. How many people are on your team already? If you spent time doing the BD yourself, what would the opportunity cost be? Could your time be spent better on the product or tech? Do you see him bringing value proportional to his cost? (x% equity)

Thanks for your response.

I see him as valuable potentially if he can make introductions to the CEOs/CTOs in the hotel industry. We've been going at it ourselves but I've only managed to get time from boutique hotels as opposed to larger chain hotels. I wonder if having someone like him could open more doors for us.

What's a reasonable equity amount to give a business advisor or a business development person?

There's a lot of risk if he does not deliver. On the other hand, if he is the real deal he could be very valuable, so I think you'd be much better off offering him a generous revenue sharing agreement on the actual business he brings in rather than equity.

He can earn equity each time he brings in money. I don't know of any other way, you can't just give away your company on promises.

Equity is for closers!!

Hire a lawyer. Do serious due diligence on the guy.

Protect yourself before you agree to anything permanent.

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