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Are there any startups that offer revenue sharing so you don’t have to rely on the mythical exit?

deleted 6y ago
[deleted]
nowherebeen 6y ago
The only startups that will offer this will probably be bootstrap companies. Otherwise, VC backed companies will always push for stock options because it’s a better deal for them. I hope more startups starts offering revenue sharing.
jraby3 6y ago
Rev share is a tricky incentive. It can incentivize people to waste money chasing revenue. Revenue isn’t always in line with the success of the business. As a business owner and VC I’d be extremely reluctant to offer that to employees.
- londons_explore 6y ago
  Most sales jobs offer some kind of revenue share. Sometimes revenue share is the only compensation. When cosco buys apples from a farmer for $1 and resells them for $2, they are effectively taking a 50% revenue share. A referral bonus for bringing in a new customer is also a kind of revenue share for the existing customer, and plenty of startups do those. I think the key is to compensate based on a revenue share of what you bring in, rather than of the total revenue.
  - jraby3 6y ago
    That’s true for sales jobs. I was under the impression he was asking about it for all key employees.
foolmeonce 6y ago
I've only heard of this with consulting. Multiple times I have heard traditional shops offer a 1-5?% of e-commerce revenue depending on the portion of work, but it is often since they are skeptical of their own success.
geoffharcourt 6y ago
Pre-IPO the venture is likely not profitable, so you'd be getting a share of zero. Companies that are VC-backed are going to be held to an expectation of a big payoff, and will be in general discouraged from offering incentives that uncouple employee incentives from an exit. If I understand this right, it's part of why founders have started to be allowed to sell some of their vested shares at funding events, it gives them some more financial runway as the company's timeline stretches out (you don't want the optics of the CEO of your $50m series C to be eating peanut butter and ramen, etc.) I do think profit sharing would be a good lever for a bootstrapped company that is already profitable and wants to give key employees skin in the game.
- beagle3 6y ago
  Note GP asked about revenue sharing, whereas you discuss profit sharing. That's not the same thing. Salespeople and sales partners are often compensated with a sales based commission, which is a revenue sharing scheme. It's common and expected, and practiced everywhere there's deal flow. Technical people can rarely prove "ownership" of revenue, so they can't leverage that in negotiation and are left with "general" ownership through options or RSUs or whatever. There's nothing inherent or natural (or unnatural) about it. If money flows through you, you can usually demand to keep some of it. If it doesn't, you usually can't.
  - eternalban 6y ago
    > Technical people can rarely prove "ownership" of revenue Maybe we geeks should let the sales teams run Powerpoint presentations instead of the actual product to address that misunderstanding.
    - indymike 6y ago
      This is such a silly thing to argue about. Sales are very dependent on product quality, availability and dare I say delivering features customers need when they need them.
      - 6y ago
saadalem 6y ago
More startup folks should read about Tomas Bata [0], he built about 2000 of houses for his workers. [0]: https://en.wikipedia.org/wiki/Tom%C3%A1%C5%A1_Ba%C5%A5a https://en.wikipedia.org/wiki/Tom%C3%A1%C5%A1_Ba%C5%A5a
TruthHurts44 6y ago
Zapier.
indymike 6y ago
It might say revenue share on the title of the contract, but the body of the contract will be about a share of net or gross profit.

deleted 6y ago

[deleted]

The only startups that will offer this will probably be bootstrap companies. Otherwise, VC backed companies will always push for stock options because it’s a better deal for them. I hope more startups starts offering revenue sharing.

jraby3 6y ago

Rev share is a tricky incentive. It can incentivize people to waste money chasing revenue. Revenue isn’t always in line with the success of the business. As a business owner and VC I’d be extremely reluctant to offer that to employees.

londons_explore 6y ago
Most sales jobs offer some kind of revenue share. Sometimes revenue share is the only compensation. When cosco buys apples from a farmer for $1 and resells them for $2, they are effectively taking a 50% revenue share. A referral bonus for bringing in a new customer is also a kind of revenue share for the existing customer, and plenty of startups do those. I think the key is to compensate based on a revenue share of what you bring in, rather than of the total revenue.
- jraby3 6y ago
  That’s true for sales jobs. I was under the impression he was asking about it for all key employees.

foolmeonce 6y ago

I've only heard of this with consulting. Multiple times I have heard traditional shops offer a 1-5?% of e-commerce revenue depending on the portion of work, but it is often since they are skeptical of their own success.

geoffharcourt 6y ago

Pre-IPO the venture is likely not profitable, so you'd be getting a share of zero. Companies that are VC-backed are going to be held to an expectation of a big payoff, and will be in general discouraged from offering incentives that uncouple employee incentives from an exit. If I understand this right, it's part of why founders have started to be allowed to sell some of their vested shares at funding events, it gives them some more financial runway as the company's timeline stretches out (you don't want the optics of the CEO of your $50m series C to be eating peanut butter and ramen, etc.) I do think profit sharing would be a good lever for a bootstrapped company that is already profitable and wants to give key employees skin in the game.

beagle3 6y ago
Note GP asked about revenue sharing, whereas you discuss profit sharing. That's not the same thing. Salespeople and sales partners are often compensated with a sales based commission, which is a revenue sharing scheme. It's common and expected, and practiced everywhere there's deal flow. Technical people can rarely prove "ownership" of revenue, so they can't leverage that in negotiation and are left with "general" ownership through options or RSUs or whatever. There's nothing inherent or natural (or unnatural) about it. If money flows through you, you can usually demand to keep some of it. If it doesn't, you usually can't.
- eternalban 6y ago
  > Technical people can rarely prove "ownership" of revenue Maybe we geeks should let the sales teams run Powerpoint presentations instead of the actual product to address that misunderstanding.
  - indymike 6y ago
    This is such a silly thing to argue about. Sales are very dependent on product quality, availability and dare I say delivering features customers need when they need them.
    - 6y ago

saadalem 6y ago

More startup folks should read about Tomas Bata [0], he built about 2000 of houses for his workers. [0]: https://en.wikipedia.org/wiki/Tom%C3%A1%C5%A1_Ba%C5%A5a https://en.wikipedia.org/wiki/Tom%C3%A1%C5%A1_Ba%C5%A5a

TruthHurts44 6y ago

Zapier.

indymike 6y ago

It might say revenue share on the title of the contract, but the body of the contract will be about a share of net or gross profit.