|Starting ecommerce venture |
Should I partner with technology firm or try and go it alone?
I am about to start a new ecommerce venture and have been offered free access to the required software and hosting by a technology company.
Only problem is they want a 50/50 partnership. Im not that keen on the partnership as I know that if it comes off I could make a lot more than the cost of the software - only problem is I cant afford the license at present and will be wanted their programmers to make some changes anyways. I am looking at other software providers but really like their software.
Does anyone have any suggestions?
Would the offer of a 50/50 partnership with the option to buy them out if a certain revenue is obtained a viable alternative? - or am I kidding myself?
|Would the offer of a 50/50 partnership with the option to buy them out if a certain revenue is obtained a viable alternative? - or am I kidding myself? |
Why not just suggest a downward sliding scale based on net profits?
Can you tell us what software you need? Perhaps there is an open source alternative. There are also companies out there that will lease you software seats on a monthly basis, and you may be able to afford that rather than outright ownership.
I'd be hesitant to go 50/50 in a partnership with someone when you are providing all the sweat and they are just giving you access to something they already have. I say this because when equity is split like that, all it takes is a clause or two in the contract for them to have actual control over important decisions.
Its hard to figure out valuation for any business, especially in its infancy. My partner and I are putting the finishing touches on our system, have filed a patent, and only now are looking for investment. I feel that we are in a much better position to raise money with a working prototype and a patent application filed than we would be 12 months ago.
My advice is to be patient, do a deal for the right reasons not because it is the only thing out there at the moment, and always be looking out for your best interests.
Thanks for the comments.
Its actually job board software and is open source php/mysql. Their take is ... we supply the script/software and hosting ... you take care of the sales/marketing.
If I was to buy it ... $30,000 and monthly hosting $500.
Personally Id prefer to have the script, do the web design etc myself, host it myself, do the sales and marketing etc
-- and have their guys do a few programming changes Id like done.
I could see the logic (kind of) if it was a site making only around 20,000 - 40,000 a year but if it makes a lot more than that .. it doesnt seem right. And if its only making 20,000 - 40,000 long term whats the point.
You can go to a site like scriptlance.com and get software similar to that for hundreds of dollars. And dedicated, quality hosting on your own server can be had for under $200/month.
of course, lets look at it from the point of the 'investor'.
Investors don't jump into new ventures expecting only 100% return on their money (they do have to recoup their $30k investment too - and at $100/month it will take a few years)so you can't see it from a perspective that they're only contributing with $100/month financial outlay. Even then, a ton of e businesses fail (in their first year, first 6 months, in a month), period. That's a risk they're taking in supporting you too.
Valuations tend to be skewed depending on who is looking at them. If what you find at scriptlance or elsewhere doesn't fit your bill (especially because of time to market since you may have to start programing from scratch) then perhaps you can make a counter offer - say, 65-35. I'd be very weary to do a 50-50, especially since if it gets nasty, then they have as much decision power as you. I have a partner, but the most I'd go out would be a 51-49 split.
The bottom line is, if you were on THEIR shoes, would you take your proposal?
I think a open source software comes for FREE.
30000 for job board software and 500 for hosting seems very unresonable, You definetely can find better solution.
Does the software provide candidate management and screening functions for job posters and candidates? It may be worth it.
However, if the company is trying to tell you its open source and making you pay for it, they're clueless. Many companies misuse the term open source. They mean "you have access to the source and you can modify it.. i.e. its open to you"... which is not the conventional definition.
If you have a feature list, sticky me, I may be able to help you identify some software.
Thanks for all the comments....
Does the software provide candidate management and screening functions for job posters and candidates?
Yes it provides powerful candidate management/tracking for job posters and has a very impressive backend. Although the front end needs a little work to allow more income/advertising options.
I honestly believe the site is capable of making 500,000 plus a year inside 3-4 years .... but dont like the thought of losing 1/2 of that.