So a friend was intro’d to a company. He secured a high-commission outsourced sales agreement with them to potentially sell their product.
They also asked him to try to raise their seed round.
He asked me for help closing a customer. And we agreed I would take 40% of the sales commission he gets for that company.
But the work is entirely on me.
Then I raised them their $1.4m seed round, and gave him 60% of the fees from that.
Now they want to raise $15m and I have now sourced a potential dozen customers.
I think there is no reason I should be paying my friend a commission. I am operating on my own leads, paying my own bills related to traveling to talk to these companies, there are no leads, no infrastructure, no reputation he is lending me to aid in my doing business. And I am going to raise the entirety of the $15m and think it would be ridiculous to give him $500k simply for having intro’d me 2 years ago to this company.
The one area he does bring a benefit is that the sales commission he negotiated is very high, so maybe negotiating to like 75/25 there makes sense. Because it’s more than what I would get at 100% commission of their other sales partnerships contracts.
What’s your advice/thoughts?
Thanks
Aware of the capital raise rules. Are we not also all aware that every day every major company in the US violates a dozen laws?
Anyway. The company has a sales agreement with Jerry, he takes 30% of the gross margin, which is much higher than what they give all the other sales organizations they outsource to. I get 40% of that, so about 13%. But its entirely on me to source companies, close em etc. There is no support system for me… the only value Jerry provides is that I can work under his sales agreement.
Then Jerry took 60% of what I raised for the seed round. He wants to take the same for the series A. I think I should give him 0% of the Series A. And maybe 25% of whatever I generate in commissions. And that 25% because he bring a high commission contract I wouldnt otherwise get on my own.