Marketing Equity: When Should One Go About It

TEAM STARTUPED 12 Jan 2022 . 1 min read

    Startups don’t typically have much money to pay outside marketing firms, but they do have one thing they can offer: a stake in those companies. With high risk comes the potential for high reward. Companies such as Uber, Snapchat, and Airbnb are worth more today than traditional giants such as AOL. However, there are times when your startup shouldn’t pay equity

    • An informed or instinctive lack of trust
    Trust between a startup and its marketing firm is essential to developing a successful relationship. Any potential partner must be vetted like a potential employee; if the trust isn’t there, walk away. A few telltale signs of an untrustworthy agency include infrequent correspondence, incomplete communications, and a tendency to point out possible problems but not offer solutions include an earn-out in the contract -- don’t hand over equity until the marketing firm has shown some results.
    • Wants placed ahead of needs
    Getting carried away is easy to do, but don’t think about marketing until the product is ready to go. Forty-two percent of startups that fail do so because there’s no market need for their product. The ducks all need to be lined up with a product in place before a partner is brought on, or everybody loses.
    • Cultural discord exists
    Startups shouldn’t offer equity to marketing firms that don’t fit their culture. Don’t throw around equity-like Monopoly money. Month-to-month contracts offer a great alternative to marketing initiatives that demand deeper pockets, and they allow startups to evaluate potential partners.
    Do your homework on potential partners: Study their company websites, talk to other clients and find out about their core values. Remember that playing nice doesn’t always mean sharing. If they don’t fit, don’t partner.

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