This week, Crain’s Chicago Business featured Doejo CEO Phil Tadros and one of our partner clients The Snackpot in an article about the value of having a stake in the equity of a startup—Doejo having a 20 percent stake in the snack culture and review site in exchange for building TheSnackpot.com.
Here’s an excerpt from the Crain’s article, “The Hardest Part: Valuing that stake” with Phil and Snackpot LLC CEO Jacob Daneman:
My main goal is to make it happen. I’m not concerned with losing percentage points to Phil. Maybe five years from now that will be the issue,” says Mr. Daneman, 30. Although the site is not yet generating revenue, he hopes TheSnackpot.com eventually will make money from advertising and affiliate sales.
Mr. Tadros, 32, says Doejo’s work on the site was worth between $50,000 and $100,000. Given the 20 percent of equity the firm got, TheSnackpot.com someday would need to be worth at least $250,000 for Doejo to recoup its time investment. “Sometimes you just believe in a person, and hopefully something will happen,” Mr. Tadros says of the deal.
Any exchange of equity in a business for professional services turns on how much the equity is worth. But determining that value, and therefore what percentage of the business should be swapped for the services, can be tricky, particularly in the case of early-stage companies. …
Doejo has formed more than 20 equity partnerships with everyone from app developers to a painter, Mr. Tadros says. The amount of equity he has received ranges from single digits to 30 percent in some cases.