2d • General Discussion 💬
Said No to 10% Equity - Took 3% Revenue Share - Made $168K Year One 🔥
Healthcare startup offered 10% equity valued at $300K on paper.
Took 3% revenue share instead. Made $168,000 cash year one.
Still collecting monthly. No vesting. No exit dependency.
THE OFFER:
Building clinic management platform. Needed patient intake automation built.
Founder pitch: "We're raising Series A next quarter at $3M valuation. 10% equity for you. That's $300K value for the automation work."
Sounded amazing. Until I did the math.
THE EQUITY MATH:
10% of $3M = $300K valuation
But:
- IF they raise at $3M (valuations fluctuate)
- IF I vest (2 year cliff, 4 year total)
- IF they exit (5-7 years minimum, 50% of startups fail)
- IF my shares aren't diluted (Series B, C will dilute heavily)
My cash flow year 1-2: $0
My guarantee: Nothing
THE ALTERNATIVE I PROPOSED:
Me: "What if I take 3% of revenue from the intake automation feature instead?"
Them: "Revenue share? That's unusual for contractors."
Me: "Your intake volume is going to 10X this year as you add clinics. 3% of growing revenue beats static equity. Plus I need cash flow, not lottery tickets."
THE DEAL STRUCTURE:
Payment terms:
- $10,000 upfront for initial build
- 3% of monthly intake automation revenue (billed monthly)
- Tiered scaling as volume increases
- No equity, no vesting, no exit dependency
YEAR ONE PERFORMANCE:
Upfront payment: $10,000
Revenue share monthly:
- Month 1-3: $4,200/month (initial rollout to 2 clinics)
- Month 4-8: $12,400/month (expanded to 8 clinics)
- Month 9-12: $18,600/month (full 15-clinic deployment)
Total year one: $168,000 cash collected
Their equity: Still private company. Still worth $0 in cash terms.
YEAR TWO (CURRENT):
Revenue share: $18,800-$19,000/month (at my cap, maintaining)
Total collected over 2 years: $336,000+
That "small" revenue share already paid more than most equity would in 10 years.
THE PROTECTION CLAUSES I NEGOTIATED:
- Monthly payment (not annual lump sum - maintains steady cash flow)
- Revenue-based calculation (not profit-based - can't hide in accounting)
- Payment within 15 days of month end (no payment delays)
- Quarterly audit rights (can verify revenue numbers)
- $15,000 termination fee if they remove the feature
WHEN EQUITY MAKES SENSE:
- You're a co-founder with actual decision-making power
- Exit is highly likely within 2-3 years (proven track record)
- You can afford to wait 5-7 years for potential payout
- You're getting meaningful percentage (20%+, not 10%)
WHEN REVENUE SHARE MAKES SENSE:
- You're a contractor/consultant, not co-founder
- You need cash flow for business operations
- Feature has recurring usage that generates revenue
- Revenue is trackable and verifiable
- You want guaranteed payment regardless of exit
THE LESSON:
Performance-based deals beat equity for service providers.
Cash flow beats paper promises.
Equity: "Maybe $300K in 5-7 years if everything goes perfectly"
Revenue share: "$168,000 year one, scaling with their actual growth"
I'll take guaranteed cash flow every time.
What partnership offer should you restructure for cash flow instead of equity?
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Said No to 10% Equity - Took 3% Revenue Share - Made $168K Year One 🔥
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