I am a founder of a unique and revolutionary platform for bricks and mortar independent retailers. The concept relies on a mobile app. The branding, app design, user marketing and promotional campaign is all in place but I need a technical individual to build a MVP to engage user research and further partners.
Is ‘sweat equity’ a dirty word - I want to partner with a CTO/technical partner and so far it’s been unfruitful. I realise we all need to earn a living but if I can find the right person I am willingly looking at a generous equity share.
As this person is going to add value it’s only natural to share the reward? Would really like any feedback…
Raphael - this is not about whether sweat equity is a dirty word, but it is about supply and demand. There are more ideas waiting to be built than there are talented developers who want to bring an idea to fruition (for something other than money for time).
If you do find your "special someone" (many of us have been looking by the way....), you'll want to understand how the equity split should work.
Time does not always translate to value and especially in development, you can have a developer that seems talented, but they can quickly get out of their depth and spin cycles on learning, versus doing. I've seen that movie so many times.
This Friday on my radio show I am interviewing Mike Moyer who wrote Slicing Pie. I've commented many times on his approach. I'll post the link to the show once it is posted so you can listen. Hopefully it will at least simplify for you the notion of how to make sweat equity truly equitable.
While "sweat equity" is not a dirty word, per se, I find that unless there are customers lining up to sign on and spend $, that asking anyone to go without compensation for extended periods of time is unwise. We all have bills to pay. Unless there are very compelling reasons why you haven't funded your business and included a budget for necessary talent to take it to the next level, then you need to engage talent with your "story." Obviously they are essentially investing time and talent in your company for deferred payment. My take is that unless you are hiring friends or family, you do it yourself until you obtain some nominal budget to pay, along with the equity component. While equity is great, as we all know, you can't eat equity. I can't tell you how many companies approach me to sell for them, saying things like "this can be a fun side business" while I build up their sales, or "as soon as you make some sales, you get paid." You get what you pay for, and in my case, unless it's charity or my own interests, I don't work for free.
A senior engineer in LA - home for Snap Chat - commented that most programmers were unwilling to get equity for their labor. Why? Most companies shut down anyway. So 15% of zero equaled zero. Nowadays they expect their average hourly fees. To avoid those lower expectations, I would mix $ with equity
Nothing wrong with "sweat equity" if done correctly - which most startups do not do.
However, it should not be a substitute for raising money. If you can't raise money now, you will not be able to raise money latter.
Assumes you actually need to raise money and can't bootstrap.
Not really a dirty word - but not considered "investment" by the VCs. It also does not pay the mortgage. This would technically be a o-founder so the shares would vest fast and deep while having a preferred tax treatment.