Should Startups Trade Equity for Social Media Influence?

Should Startups Trade Equity for Social Media Influence?

Simon Jenner

Friday, 7 July 2023

Should startups trade equity for influencer clout? This post explores this complex decision, weighing potential risks and rewards.

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As a Startup Advisor (a service we offer for free to all our startups) to lots of the startups in the lab I see patterns in the questions I get asked by founders.

A question I have been asked twice this week is 'Should I give up equity in my startup to a social media influencer?'. This question is coming as they enter into the Grow startup stage (START | LAUNCH | GROW), there Minimum Viable Product (MVP) is about to or has just launched and they are looking to acquire there first 100 users/customers.

The decision to trade a stake in your startup for influence is a significant one. This post aims to provide insights on this modern startup challenge.

Understanding the Value of Equity

Equity signifies your startup's ownership. It's the outcome of countless hours of hard work, innovation, and dedication. Trading equity for services, such as influencer promotion, can offer substantial advantages but it also involves diluting your control and potential future profits.

Understanding your cost of acquisition

To understand the value of an influencer you need to know what it costs to acquire a user/customer. If it costs you $100 to acquire a user/customer and an influencer can bring you 10 customers then thats worth $1000 to you. If you don't know this cost, go figure it out by running some paid marketing campaigns (tik tok ads) so you know the value the influencer can bring.

The Power of Influencers

Social media influencers, with their wide reach and devoted followers, can introduce your brand to a large, engaged audience. Their endorsement provides a social proof that can increase brand recognition and customer trust.

Evaluating the Influencer

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