I received a partnership offer - advices needed

[carlitto]

Hey,

I have a decent site, the URL doesn't matter and it is non english. Almost 4 years old.

I received an offer and I wanted to post here cause it will affect my future.

Someone wants 50% from the revenue from now on and he will give me at the beginning 10x times my monthly income. Again, I will still receive 50% of the revenue from that date on.

I know the guy for 2 years, we are not friends but he bought advertising on my site since that time. He has a poker room.

He said he will participate at some decisions but he is so busy he won't change my lead so not much will change. OFC, he will have access to my passwords. He has alot of money and companies and I don't see him as a scammer. But of course we will have contracts signed.

Anything I want to invest in my site he said he will participate also (deducted from revenues) so I won't use the money he is willing to give for my business.
That's cool.

What I don't like, but its tolerable:

He knows I have some other poker/casino domains (undeveloped). He said he will be partner also on those after I launch them as I won't be allowed to develop other poker communities in my country without telling him. I can understant this.

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All revenue from the site will be wired in some bank in Virgin Islands or a place like that (Antigua, Gibraltar, Cyprus bla bla). If someone knows anything about this stuff and he cannot reply I would appreciate some private message about this. I'm clueless about offshores. Scares me a bit knowing you can open an account even without going there

Can 2 persons have a bank account and both with same rights about withdrawals and stuff? Probably we will make a new company.

I hope veteran affiliates will read and reply (Jeremy, Pokerprop, Pokernations and others... too many to mention).
I think I will do it but maybe you can tell me some reasons why I shouldn't.

Thanks for your time!

[PokerNations]

If sounds like you're willing to give up half of your current sites income as well as your future ability to open and profit from other web portals for just 10 months of income.

I don't know if that is such a great deal. But whatever you wind up doing, make sure EVERYTHING is spelled out very clearly in a legal document that can be enforced. This is to protect both you and he from any problems down the road.

Misunderstandings can happen, and you may have a different viewpoint on some terms of the agreement than he did. Having it all in writing is going to help you prevent such problems from cropping up down the road.

Also, it sounds like his 10-month payment is also going to entitle him to half of all revenue in any other ventures you decide to operate, which will also require him to give you approval on. I don't think that sounds like a great deal if you could potentially be bringing him a ton more revenue in the future on projects he never initially signed on for.

I do think creating a new company between the two of you would be wise. I'm not familiar with offshore banking, but here in the States you can certainly setup business banking accounts with specific levels of access. I'd definetely recommend obtaining legal and accounting advice if this is for a significant amount of $$$.

[MJ]

Hire a lawyer, that's all the advice you really need honestly.

[Jeremy]

Hire a lawyer, that's all the advice you really need honestly.

That's probably the best advice in this entire thread. However I will say a few things from past experience.

Don't be afraid of offshore banks....Nobody in the poker/casino business banks in US/UK. This is standard.

In respect to giving up half your revenue though, you should have a long hard think on that. If it is a 50/50 deal, who will actually be in control? My guess is the buyer will feel like he is since he paid you X amount of money.

I would rather just sell 100% outright than own a portion of something and be somebody else's bitch for years to come. And trust me, I speak from experience.

I wish I could be more positive, but I have personally been way more successful on the buying side versus the selling side in this business. Selling a portion of equity is usually a disaster in this biz.

Unless you really need the money, selling 50% of the equity is probably going to turn out to be a bad deal for you in the long run. Hit me up on skype or phone if you want to chat further.

[carlitto]

Thanks for the replies!

Yes I kinda need the money. I still have 10 days to decide so I will write down all the pros and cons.

The lawyer can be pretty expensive and Im not if I can find a decent one here. But I will look into it. The lawyer is only for the contract and other papers ?

Lets say after 1 year we gonna fight/argue alot. How can this end?
Maybe we can split the affiliate accounts equaly. But i need to think whos gonna keep the domain. Tough decision :/

[pokerprop]

I was mentioned here so feel compelled to respond. However, all I can really think is to share my personal experience.

Almost all business deals like the ones you've mentioned that I've done, have been ones that turned out to be learning experiences rather than successful ventures. As Jeremy mentioned about loss of control, well this has been one of the biggest downsides/situations for me. In one of the bigger cases I had full control, but could not operate sharing half the profits and resentment for the other person developed overtime (I was young in this later example).

In January 2007 I entered a 50/50 partnership, and this has been great. It took a lot of tries though to find an ideal situation like this. I think a lot has to do with that sites he brought to the table matured so well and sold for enough money to really get our business going, so when sites I later develop turn around and make tons of money that I could have made on my own I realize its just evening out and that time value of money in affiliating and how our combined early contributions got us to this point I don't regret it. Also both of us have had times where we've totally slacked off had things come up and the other picks up the slack etc. Its been overall good partnership.

So I know partnerships can work, however from my overall experience with them has been poor, and the larger the business given up more so the case.

If your not comfortable with the deal, but need money. Of course and outright sale is possible. Another possibility is to sell this partner half interest in the form of him receiving advertising spots which are clearly defined. You control the rest of the site and earn from the rest of the accounts etc.

My 2 cents for now Will follow thread and add further if I think of anything helpful or anything comes up I have an answer or opinion to share.

[Unknown Webmaster]

When I were considering a partnership, I wrote a detailed description of how I imagined that things would work after he had bought a part of my business. It basically made us realize that a partnership would be a bad idea, even though we had talked about it numerous times and had both agreed that it was just a matter of getting the details of the deal right.

[Satya]

Hi Carlitto,

I work on the operator’s side and have been in the industry for quite a few years now. Your post is interesting and I thought I should share a few things.

These sorts of deals are not uncommon in our industry. I have seen quite a few and fortunately most of them have been successful so far. At least I haven’t heard if anyone is unhappy. These deals were managed by professionals and done between some very mature people (in our industry of course).

A lot depends on your partner and his intentions. If you really are comfortable with the deal and the financials, the following is what I would suggest -
1) Money spent on a good lawyer and professional accountant will be well spent and you will never regret it.
2) Make sure the contract is enforceable in your home country or the buyer's home country. Avoid contracts which are enforceable in tax havens - difficult to enforce them
3) If you are going for a joint account, make sure both of you need to consent before money is transferred. Ideally I would have separate accounts with money split 2 ways every month or every time a payment is received.
4) I am assuming that your partner is not knowledgeable in running your site and therefore wants you to manage it. If this is the case, you should try to get 100% control over the running of the website if possible.
5) Try to include a buy back clause in the contract if you expect your website to make you more money than your current projections. So if your revenues improve significantly, you can pay back your partner his 10x (or mutually agreed amount within a time frame) and regain 100% control of your website.

You need to remove the following clause from your contract or else modify the financials. This is very unfair unless I am missing something.

He knows I have some other poker/casino domains (undeveloped). He said he will be partner also on those after I launch them as I won't be allowed to develop other poker communities in my country without telling him. I can understant this.

Hope it helps. All the best.