BARTERING FOR EQUITY

Author: Neha Gupta, Writer for Ormita Australia Limited

The Times Group has been using this approach through their venture Times Private Treaties. It is a barter program in which Advertisement space is bartered for equity stakes in new and established companies. This saves the new company cash so that resources set aside for brand building activities can be used toward business growth & expansion. This business model is designed to share risk, accelerate growth through advertising and create value for the brand in the long term.

It is really important for entrepreneurs and business owners to take the same creative approach with regards to financing. As many times new businesses fail because of under financing. But the problem isn't lack of capital, its lack of imagination. The flexibility to see beyond cash and have the willingness to barter is all it takes to be successful. There are many situations when cash is unavailable. If you lack the hard assets required for a bank loan, you need to be creative and flexible.

Some other examples of bartering for equity in modern economy are”

· Media giant Walt Disney negotiated a barter with longtime media rivals (News Corp and NBC Universal, the creators of Hulu) to take an equity stake in Hulu.com, the fast-growing web site where users can watch movies and TV episodes for free. In exchange, Disney provides content — episodes of ABC shows to Hulu. Hence, Walt Disney happens to reach to a larger audience and gain a share in a project of the rival company and Hulu.com gets the much needed content for its users.

· Twentieth Century Fox, SKG, and Universal Studios Home Video have entered into a barter deal with Kozmo.com. The movie houses provide Kozmo with videos and DVDs at lower prices in exchange for non-cash equity stakes. Both sides benefit, Kozmo guaranteeing themselves a supply of videos and DVDs, and the studios enhance the distribution of their product.

· Hollywood movie stars often choose to pass on upfront fees for starring in a movie. Rather they’ll choose to accept the barter option which will include an ownership stake in the film. This way stars share a part of the risk and because they do so producers are more interested to work with them as to minimize their personal risk.

· Following the example of the Times Group other major news houses in India have also started to consider barter for equity. According to Business Standard reports HT Media Ltd, Dainik Bhaskar and Dainik Jagran want to barter newspaper space for equity as well.

· Sobieski Vodka signed up the Bruce Willis to promote its vodka. Sobieski vodka is owned by Belvedere, the French spirits group. Willis took a 3.3% barter equity stake in Belvedere as payment for his services. When the announcement was made the Belvedere shares jumped 10%, suggesting astuteness of the trade agreement with the movie star.

Barter is the most effective Equity Financing Methods to Sustain Growth. Try it!!

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