Negotiating Business Deals/New startup product advice -5
Hi, I am Mourad the CEO of a new startup called LocName which is a web and mobile App that converts your point on the map and address details to a short, unique and permanent name that you can remember share easily. www.LocName.com
We have developed a new tool for Websites to use our application to capture their users addresses accurately instead of filling long address forms (pls download presentation for more information http://goo.gl/1OyQvt
For the launch we are planning to do a partnership program with incentives for early birds, with this program they can become an indirect investors in a promising start-up and LocName success will be their success, we have 2 models in mind:
Model 1 - Revenue share
We will offer each website using our tool a revenue share percentage for 2-3 years based on the hits come from their users
i.e. if you have 1000 users and the hits coming on them are 20% from our total hits then they represent 20% from our revenues, the incentive is that we we will pay you 10% from the 20% revenues for 2-3 years.
Model 2 - Free Ad space
We will offer each website using our tool a free Ad space on his users only for 2-3 years, and he will have the total freedom to used it to display his Ads or sell it.
We need your opinion regarding the two suggested models, is it a good idea? which model is better? what are your recommended tweaks for the best model? Any different new model you suggest?
Thank you for your question.
I haven't had time to study your system or how exactly it works, but my initial reaction is that the percentage agreement seems to be more inviting to potential investors than ad space. The percentage of revenue sharing allows the investors to grow with you - if you have success they will too. If you don't have success than they won't either, but they also will have limited investments so it's ok.
For the second scenario, ad space could be advantageous but not knowing how much traffic the site is going to get offers little incentive to be involved. As compared to the first model, the second has less to offer (at least at the beginning).
It is always best to offer the early bird investors something that is based upon growth only, versus what "might be" growth in the future. That way, they feel you are willing to take risks with them, and it gives them confidence.
It seems you may have a great idea going there. I wish you well!