equityI am starting several companies with a person I would like to describe as a “connector”. Essentially he connects me with the right people, to start a company or in some cases simply make a project. In a new company, where one side is technical / programming and the other side is the business person, who is going to make the concept of the product and has the big brand connections, how much equity should the connector get, who connected both sides together? Equity
I have had many ‘connectors’ and have never given them equity as they have not been on my board as a non-exec, been an employee or been an investor.
Most of the time connectors set up meetings which take up my time and I have to do the closing and ‘selling’. Granted, closing and ‘selling’ are easier after a solid referal, however they are simply an introduction service. My connectors got rewarded through percentage of ongoing sales or relationship with that person. This encourages them to introduce me to the right people where my time is not wasted and a sale or connection will end up successful.
Many connectors will have prior agreements with the other party also, where if they make a successful connection they gain a commission from them also. So they make money and are rewarded from both ends.
Over the years I have seen many many connectors and most are not worth spending any time with. They seem to be a market that has sprung up through opportunism on the back of the start-up surge. In many cases they come out of big brands wanting access to ‘Innovation budgets’ that they can only get hold of through contact with a start-up and so send out connectors to put them in touch and give them access.
I have only maintained one relationship with one connector over the years and that is because they have a direct relationship with people I need to get in front of and have generated success and advocated for me as if they are a board member.
So - as you may have guessed, by opinion of this service is not necessarily positive. If their success is only measured through introductions then I dont think they should get equity. If they are involved in the every day running of your business then perhaps. If they give up time each month and are on your board because they bring extra value then sure (I gave my non-exec 1% for reference). However, I think referals should be rewarded through commission on successful agreement between introduced parties.
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