Comments on: Relationship “contracts” need to be based on our inability to predict the future.

By: The difficulty in translating and valuing knowledge. | Taylor Davidson

The difficulty in translating and valuing knowledge. | Taylor Davidson — Fri, 21 Aug 2009 15:45:29 +0000

[...] Me, Relationship “contracts” need to be based on our inability to predict the future. [...]

By: Five cultural and technological frames shaping new business opportunities. | Taylor Davidson

Sat, 30 May 2009 19:29:54 +0000

[...] Relationship “contracts” need to be based on our inability to predict the future., April 8, 2009. [...]

By: Taylor Davidson

Taylor Davidson — Thu, 09 Apr 2009 16:18:33 +0000

Still, an individual case is still just an individual case

By: Amar

Amar — Thu, 09 Apr 2009 15:22:41 +0000

Taylor – I should have mentioned earlier that I had worked with the first consultant – who didn't agree on my proposal – before. So I had a solid, pre-existing relationship and information asymmetry wasn't as big of an issue IMO, except perhaps in the sense that they may not know how decisions are made at my firm and where a specific project fits into the big picture. It is a small firm and maybe the risk wasn't for them, especially after having been burnt by some startups.

By: Taylor Davidson

Taylor Davidson — Thu, 09 Apr 2009 10:22:11 +0000

Amar: but why do you find that difference between late stage and early, formative stage?

There's a couple issues here:
- Early stage businesses are as much about the people than the idea; thus if the consultant doesn't have a solid pre-existing relationship, it might be hard to commit time behind any business idea
- Information asymmetries make it pretty difficult for any consultant to understand the business idea and prospective market as much as its creator, making it difficult to assess risk and reward in the same way

What you're really alluding to, though, is that cultural values and expectations play a large role in framing decisions and that different systems change at slower rates; legal, political, cultural, business, technology...

It's human nature to react to change by resisting and attempting to return to the past, but the real opportunity (and need) is to look for new structures instead of attempting to recreate old, broken, misunderstood systems.

By: Amar

Amar — Thu, 09 Apr 2009 01:31:30 +0000

Taylor – I have tried what you suggest re: offering a fraction of the payoff to collaborators instead of boatloads of upfront cash with mixed success. As with all such investment offers, I found that there's much more acceptance at later stages of a venture, e.g. a concept has been proven, business plan has been vetted, etc., than at an early, formative stage.

For instance, one consultant wanted to help me evaluate a number of new market opportunities. I asked if they'd be willing to give a big initial discount in exchange for a payoff if any of the opportunities took off. They balked.

I offered another consultant – this one, more technical in nature – a percentage of revenue for a fixed period of time in exchange for a significant discount on initial prototype development. I set it up such that we'd have to hit a certain volume for them to break even. This second consultant accepted — possibly because the path towards growth was visible by the time I started working with them.

Some other channel partners have asked me for market exclusivity in exchange for initial help at low cost. Exclusivity is a big no-no, even at the cost of losing an important partner!

By: Aaronchua

Aaronchua — Wed, 08 Apr 2009 23:18:54 +0000

Wow, I finally see how disruptions in finance, legal etc can be leveraged on to create new forms of startup investment ventures. Thanks for clearing my perspective!