Planning a Partnership Agreement with Web3ST
Obie Fernandez, founder and CEO of Olympia, seeks to draft a term sheet for a partnership with Web3ST, another Olympia user. The partnership aims to establish a referral/affiliate relationship, where Web3ST will refer customers to Olympia and earn credits on their Olympia account. The assistant provides guidance and drafts a term sheet involving revenue sharing, credit usage, term reviews, renewal terms, and unique code generation for referrals. The draft serves as a basis for the official agreement to be prepared by a legal professional.
we are partnering with Web3ST, a company that is a current user of Olympia and is tapped into a large network of potential customers. need to draft a term sheet for the partnership, which is lightweight and essentially a referral/afilliate relationship. they will refer customers with a special signup code and we will track those new paid accounts, and take a percentage of the revenue and apply it to Web3ST's account as a credit. there will be no cash exchange in this partnership. the win-win is that Web3ST gets credit to use as they wish including to apply against their own Olympia bill, and we get a flow of new quality accounts that should have product market fit, based on Web3ST's network
Sure thing, Obie! Let's put together that term sheet draft. There's just a few things I need to know:
- What's the percentage of the revenue that will be credited to Web3ST's account?
- Is there a cap on the total credit that can be applied to Web3ST's Olympia bill?
- Will this arrangement have a set term and renewal conditions or will it be indefinite?
- How will the referral code system work, is the technical setup ready?
Once we clear up these details, I can help structure a simple term sheet for the partnership.
let's take this one at at time. 1. let's say 20%
Great, we'll credit 20% of the revenue to Web3ST's account. Now onto the second question: Is there a cap on the total credit that Web3ST can accumulate on their Olympia bill from this partnership?
dunno, didn't think about it. what do you think?
I think it might be a good idea to set a cap, at least initially. This protects Olympia if the partnership is remarkably successful. We can always renegotiate and raise the cap later as the partnership proves fruitful. How about setting a preliminary cap at a value that covers Web3ST's Olympia bill for 6 months to a year?
ok i get where you're coming from. i should have mentioned that we want them to be able to exceed the amount of their bill with the credit, so that they can apply it to new customers in their network that can't pay for the service themselves
Absolutely, we can structure the agreement such that any excess credit that exceeds Web3ST's Olympia bill can be used by Web3ST to pay for new Olympia accounts. This motivates Web3ST to refer more users, increasing Olympia's customer base. Is there a limit to this or can they sponsor as many new customers as they want provided they have the credit?
i think there's no limit altho we should put in some sort of terms to protect ourselves because we still don't know if the current pricing is profitable for us against actual hard costs. (there's not enough real usage on the system to know yet)
Understood, Obie. How about adding a clause which allows Olympia to review the terms of the agreement periodically, say every 6 months? This lets us adjust the cap based on the actual cost analysis once we have sufficient data, ensuring that Olympia remains profitable even with the discount.
For the next detail on our list: Is this arrangement going to have a set term and renewal conditions, or is it indefinite?
renewal def
Okay, we'll incorporate a renewal clause in the agreement. It's always good to have a specific period after which both parties can reassess and confirm they're still benefiting from the relationship. How long do you think the initial term should be? A year is a common duration for these sorts of arrangements.
year
Absolutely, a one-year term for the initial agreement sounds reasonable. It will give both Olympia and Web3ST enough time to gauge the benefits of the partnership.
The final detail to sort out: How is the referral code system going to work, and is the technical setup ready for it?
we still need to implement it. i think we need to give them specific codes or a way to generate unique codes. it can't be just one code that can be shared
Got it, Obie. An individual referral code system makes sense for tracking and avoids the potential trouble of a single shared code. Once that's in place, we can specify in the term sheet how Web3ST will be given unique codes to distribute. When you're ready, I could help you brainstorm some features or specifics for that referral code system to ensure it works well for this partnership. What do you think?
love it. can you give me a draft of terms for now?
Absolutely, Obie. Here's a draft based on our discussion:
Partnership Agreement Term Sheet
- Parties Involved: Olympia and Web3ST
- Purpose: To establish a referral/affiliate relationship where Web3ST promotes Olympia services and earns credit on their Olympia account as a result.
- Revenue Share: For each new Olympia account that signs up using Web3ST's unique referral codes, Web3ST will receive a credit equal to 20% of the revenue paid by that account.
- Credit Usage: The credit accumulated by Web3ST can be used to pay for their own Olympia bill, or to sponsor new Olympia accounts. There is no limit to the number of accounts they can sponsor provided they have the credit.
- Review term: The agreement will be reviewed every six months to allow adjustment of the credit cap based on actual cost analysis.
- Term & Renewal: The agreement will last for an initial term of one year. Upon expiration, the agreement can be renewed under mutually agreed terms.
- Code Generation: Web3ST will receive unique referral codes or a means to generate them to track referrals accurately. The technical setup for this is yet to be implemented and is out of the scope of this Agreement.
Please review the drafted terms and let me know if you'd like to make changes. Remember, this is merely a term sheet and the actual agreement will need to be drafted and reviewed by a legal professional.