ARDMORE, PA: Gregory Communications has taken a stake in its client RealTIME Media - continuing the trend of small hi-tech PR firms receiving equity in lieu of fees.
The equity deal, announced this week, represents approximately half of Gregory Communications' account with RealTIME, valued at $100,000.
While taking equity stakes in clients isn't new in the PR business, industry observers say there has been a resurgence among smaller PR firms taking equity in cash-hungry, high technology startups.
Larry Weber, chairman and CEO of Weber Public Relations Worldwide, said many new agencies are willing to take an equity stake in clients because of the potential for a huge future payout. 'The best formula is a 50/50 split so you can cover overhead with the cash fee,' he advised.
Strategy Associates, a PR firm with offices in Silicon Valley, New York and London, charged a retainer fee but took equity earlier this year in Ignite Knowledge Management, a Silicon Valley Internet company. It was the third time the firm has taken stock in a client, said Bill Harris, partner and co-founder of Strategy Associates.
Harris said the firm usually limits the size of its stake to 10% to 15% of the value of its retainer fee.
Rockville, Maryland-based RMR & Associates, which works with emerging growth companies primarily in the DC Beltway, has taken equity in four clients in the past two years.
'What we're saying to some of our young companies is we're willing to sell $150,000 worth of services in lieu of stock options,' said Robyn Sachs, president of RMR & Associates.