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What is the general advice in situations where a company asks for ownership of a percent of IP since they’re paying the “NRE” cost of the pilot?

J
Written by Jasmine Sunga
Updated over 5 years ago

I wouldn't agree to that as it will make things complicated in the long run. Unless you have no choice, avoid that.

we had a customer who also wanted compensation for being an early customer (they had never asked for IP, but did ask for warrants, etc.). we finally granted them advisor shares, which satisfied them.

This is not illegal, essentially CAB advisors are  the same thing. Most of the initial customers buy from startups because they want to customize for their unique requirements and contribute to your product development. Some take a lot of pride to be part of your journey. I know some initial customers even $$ invest. In our case, their time and input were invaluable.

Make sure you’re getting something in exchange, unless it’s coming out of your personal equity (and not diluting investors). Remember that while being nice is … well, nice … you have a fiduciary responsibility to your investors. Customers should get value because they pay money, and they can get extra value (equity) if they’re willing to do specific contractual things.

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