Compensation · Prototype compensation startup

How do I treat people who offer to help me get started for free?


March 10th, 2018


I've had a few people offer to help me with 100% of their time outside of work/school on building out my company, and they've all insisted on doing so absolutely free. In the event we are successful and start to get enough revenue to pay them or get institutional funding, they say only then would they like compensation. I would like to protect myself and the property of the business that they help me with, so I was wondering the best approach to making sure I don't suddenly get slammed with some "you need to pay me" demand and that they don't one day say "thanks for the help stealing your idea." I know there are non-disclosure and non-compete agreements out there, but I also do not want to insult them or drive them away from my team. Can anybody help with this?



David M

March 12th, 2018

Incorporate or form an LLC, limit your liability, have formal contracts. Business is business. No one works for free. When the money comes there is never enough to go around.

Paul Garcia marketing exec & business advisor

March 11th, 2018

It's nice that you have friends who want to help. It feels good. However if they aren't the right people that will actually add value to the company, there are lots of sources of "free" labor. Not paying a salary doesn't make them free though it sounds like it is. Consider that every intern (for lack of a better term) requires supervision, direction, and training. That's all time YOU will have to put in the business doing something other than working on things that only you can work on. It takes away you as a resource to the business just to manage this free labor.

Now if your tasks are trained monkey tasks and anyone could figure out how to do them without instructions, then by all means, lean on your friends who want to support you. This might be things like passing out fliers, transcribing documents, cleaning the workspace, etc.

What you haven't shared is the kind of tasks you're hoping to delegate to your friends. Anyone to whom this is a hobby (only time away from primary job or school) probably does not deserve a stake in the business (equity). You can keep track of volunteer time on your balance sheet and put in place a plan to pay them deferred salary amounts once you have raised money. Your investors will question this, however it's better than deferred salary for yourself, or someone else with equity in the company.

Startups are notorious for consuming time unpaid. It sounds like at this point your friends believe in you but not in the company, otherwise they would be willing to take greater risks like making this their full-time job, rather than only offering help with scraps of their time. That's sweet, but it doesn't actually help you run your business.

My approach to these helpful friends would be to thank them for their supportive attitude. And if you do have tasks that don't require supervision, let them assist you with those, but not with things that actually matter to the business. Working in their spare time, they treat your business as a hobby or a favor. That's not how you want anyone to treat your business. You want people who are devoted the way you are, and are driven to succeed by their dependency on the success of the business.

Rather than volunteer their time, what would actually be helpful to you is a collection of small loans or donations from all these friends so you have the money to actually get the business off the ground. This initial seed money is something you can show larger investors (or banks) that there are people who believe in your business with more than words, so they should too. Anyone can offer you a few hours of their time, but what you probably need more right now is the money that amount of time represents.

Alexandre Azevedo Founder of The Traction Stage Blog & Podcast

March 16th, 2018

Hi, Andrew!

To decide about that matter, I would thoroughly consider:

1) Their true motivations: Nobody works for free. If they don't get money, they get something else. What is it? Fun? Learning? Experience? How does your startup add value to them?

2) Your dependence of their work: If, at some point, they are not motivated for the things you've found in item 1? What can happen? If they stop working, will you be able to find an alternative?

3) Setting numbers: how much money is "enough money to pay them" in the future? How much will they earn? Here, I would strongly recommend you to design a contract. People change their mind. People change their perceptions. Including you. Set some basic rules (things that worry you the most) and put into a contract. If they respect you enough, they'll understand. If they don't understand, I'm sorry, but they were not the right partners for you to have in your business.