“Hi! You’re a venture capitalist. We’re a tech startup. We have a web app we want to sell to people.”
“Great! So here’s how this works: we’re going to give you a chunk of money. You’re going to use this to build your web app. It’s called an ‘advance’. We’re also going to give you 12% of the revenue from your app…but only after you’ve paid back the advance in full. That’s 12% amongst your entire team, by the way. You sort out who gets how much.”
“Um…what?”
“Yeah. The way you’ll make your money is by going out and showing people your app, so they’ll buy t-shirts with your app’s name on it, because they love it! Which we’ll also take a chunk of — we call it a ‘360 deal’.”
“I don’t–“
“Also, you’re going to sign a contract with us that any other web apps you make will be our property, though we’ll be able to renegotiate your percentage at will, of course. And if we don’t like your next web app, you’re fired on the spot…but we’ll keep collecting the revenue from the web apps you’ve created that we own, and we’ll send you your royalties on it, of course…just make sure we always have a current address for you.”
“Well, I’m not–“
“Also, we don’t like the actual way your web app works, even though we want to sign a contract with you based upon how it works. We want it to be a social network instead of a content management system, because our surveys show that social networks make more money.”
“But that’s not what we do.”
“Who gives a shit what you do? You think you know better than we do, just because your first web app got funded by complete strangers on Kickstarter? We’re the professionals here. Also, when you talk to Wired: you’re 24, not 34, and unmarried.”
“Are you kidding? I have a wife and two kids!”
“Yeah, but we find that Wired readers are more likely to sign up for a web app if they’re sexually attracted to the founders and believe they’re available. It’s all about the fantasy, kid. You do blow?”
“What? Of course not!”
“Oh, you’ll be fine, then.”
“Look, why are we getting 12% of the income, when we’re the ones doing all the work?”
“Well, a third of it goes to Amazon for web hosting and delivery–“
“You’re fucking kidding me!”
“Hey, don’t blame me, blame the market. And we take the other 55% for our initial investment, and for marketing you.”
“But we’re essentially paying for the development costs out of our own paychecks, right? And you’re treating that as an investment, so even if our web app tanks, we still owe you that money, but you can write it off as a tax loss, right?”
“Well, yeah. Look, that’s how this business works. Don’t be naive. You want this deal or not? You wanna stand on the same TED stage as Mark Zuckerberg? Come on, kid, this is the big time. Shit or get off the pot.”