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Ask HN: Professional Services for Startups (Legal/Tax/Acct) for 2% Equity?
I've heard that a number of legal firms are offering interesting alternative payment systems for their professional services.
I'm wondering how interested the startup community would be in offering equity instead of cash upfront for these services. Many startups are unable to afford the cost that comes with professional assistance and push off the cost until later when it's to late.
I'm just curious as to how people feel about this practice and how many people are willing to take this type of offer.
In short (tl;dr)
You buy an internal professional services department (legal, tax and acct) for 2% equity.
- andrewstuart 15y agoNo don't do that. Giving revenue for professional services is a really bad idea. It's a once off service which you can largely do without for a while, or do yourself. Read the book "do more faster" from techstars - it has a section on legal and stuff. Foolishly giving away equity for once off services will make investment by angels/VC's further down the track very difficult/unlikely. Get those professional services when you need them, which is only after you have revenue. Use your very first revenue $ on legal. You have no need to spend anything on accounting/tax when you have no revenue.
- camz 15y agoI can understand your thoughts on many of your opinions but I also disagree with some of them. For example, if you're not generating revenues and your incurring expenses. Then that would result in losses. Losses would provide you refunds and additional funds to keep your startup going to slow the burn rate. Alternatively, you could also save the losses for the future to offset any income. But, if you dont take care of it presently, then you'd take huge losses that you'd be unable to recoup in the future. What's your opinion on this issue?
- andrewstuart 15y agoAs a startup there should be almost no other costs except your time and the price of a domain name. Forget about tax losses - you should not be spending money on things that will give you tax losses - if you are then you are burning money. You should be burning time, not money. A tax offset for losses is not a "refund", at least not where I live. It allows you to decrease your taxable income. If you have no taxable income (i.e. revenue) then you cannot offset those losses against anything.
- vipivip 15y agoGiving equity at an early stage of the startup is not good, what happens if the startup fails?
- camz 15y agoGenerally, the risk/benefit is fair because the chances are that the startup will fail. If the startup succeeds, then both parties would be fairly compensated. But, by not paying upfront then the startup could save money and hopefully gain time to be successful. (I'm neither for or against the idea, but thusfar it seems that most people are against it)
- ScottWhigham 15y ago2% is too rich IMO unless your idea/startup is awful.