discuss Asking for equity from startups: Is it a bad idea?

[Arpit131]

Elliot Silver shared an article on his blog selling domain names for equity.
Here's what he thinks:

"After discussing quite a few deals that involved selling a domain name and receiving at least some of the consideration in equity, I have come to the conclusion that there are big issues for both parties.

From the sales perspective, selling a domain name for an equity stake requires the involvement of a good contract attorney that knows how to contractually protect the seller. I wouldn’t want to own an equity stake in an entity that turns out to be a worthless shell. I also don’t want my equity stake to be diluted nor do I want to be required to invest cash into the company, especially if the cash investment is substantial. Finally, I want to make sure I am protected if the startup fails or if the startup faces legal troubles. These are just a few items that need to be considered and negotiated in a deal that involves receiving equity.

From a buyer’s perspective, it can be difficult to deal with a domain investor who isn’t all that knowledgeable about startups and their needs. No startup founder is going to give up a ridiculous amount of equity to buy the domain name, so a domain owner who asks for a large percentage (but will play no role in the startup) is being difficult. Domain owners’ requests could also add to legal fees and take additional time to work out. If a startup is looking to move quickly, this could be problematic."

Source

I read the story of Uber.com sale and the owner ended up making several million dollars.

What is your perspective on this topic? Would you sell it for an equity or a fixed price?

 

[brindle123]

I would do either if the deal was good enough!

Stock options or free memberships or whatever would be nice if it equals what I think the domain is worth.

 

[Cdomains]

What is your perspective on this topic?

Sounds like it could be a good idea, but you would still need to spend some big bux on attorneys to make sure your interest in the name and the associated deal was secure.

So it would cost you some money to get involved with something like this.

 

[Recons.Com]

I would look at what the start up doing.

Probably the seller of uber.com liked the idea behind.

I also happen to have a good knowledge of how VC works, as I have had few MBA level classes and have been part of a team that won few national level competions for VC&Private Equity.

 

[Arpit131]

So it would cost you some money to get involved with something like this.

Definitely. But the payouts could be huge in this case!

 

[bytedo]

Sounds like it could be a good idea, but you would still need to spend some big bux on attorneys to make sure your interest in the name and the associated deal was secure.

So it would cost you some money to get involved with something like this.

If you dont have any objections to to the idea other than reservations over the attorney fees, then you could just equate the fees to sales/escrow fees. Only difference is you have to pay it upfront and from your funds. But if the deal is with a start up you are fully convinced would make money then you just have to rearrange your finances to make way for the fees.