When to grant sweat equity to a non-employee/non-founder


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My partner and I founded a start-up personal service business. We own A shares (voting) and are working full-time on the business. We have procured investors, who own B shares (non-voting). The minimum investment is $25K. In lieu of paying a graphic artist, space designer, and other consultants up front, my partner wants to offer sweat equity in the company. I do not think we need $25K worth of their services, and am hesitant to offer an ownership stake for work done at the front end. Thoughts?

Equity

asked May 2 '12 at 03:30
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Susannah
1 point
  • "I do not think we need $25K worth of their services, and am hesitant to offer an ownership stake for work done at the front end" - Why does the sweat equity you're offering have to amount to $25k? – Henry The Hengineer 7 years ago
  • Think of your equity as your currency! – Frenchie 7 years ago

2 Answers


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Yeah. Get real ;)

am hesitant to offer an ownership stake for work done at the front end

Why?

Seriously. Money is money. If you use shares as money, then what do you care WHERE The work is done, as long as you get a fair exchange. Basically you tell me right now the hourly rate of a frond end developer is - dollar per dollar - less worth than the one of the database guy.

Sure the designer may get less USD Per hour - but a USD is a USD, so he gets a smaller share, but still... either you pay money, or shares, and I totally fail to understand the "for work done at the front end" side of the argument here.

answered May 2 '12 at 06:02
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Net Tecture
11 points

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Sell them your vision and valuate your company share by your vision. Give them as much as they deserve and non-voting share.

answered Jul 1 '12 at 16:49
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John S
184 points

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