Thoughts on offering Software development in return for Equity for a tech startup


I have been developing some software for an online venture in return for significant equity. I am working with another founder who is developing the business. The current thinking is to value our contributions. One approach I have taken is to assess what I would charge to provide the S/W as a fixed charge project to another customer, and also to benchmark this against what other software companies may charge. This figure would then translate into startup equity. We probably would not allocate all of the equity inorder to reward for efforts in the first year.

Also I am struggling to understand how to work out the salary situation. We have talked about deferred salaries and translating this into equity, but I get the feeling this idea is not good, better to keep it seperate and treat it as a director's loan. Also I am aware of the need to not pay salaries(to directors) until income starts coming into the business, otherwise any invested money will just be eaten away.

Any thoughts on good approaches for the above would be most welcome.

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asked Feb 6 '13 at 07:51
Sam Jolly
116 points
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  • I'm not really sure what the question is? Are you asking if you are not taking a salary how to work out equity based on work? – Tim Nash 11 years ago
  • It is not clear what you are asking here, so maybe an edit would help. Also, search the site, as there are loads of questions along these lines, so you may find what you're looking for already there. – Steve Jones 11 years ago

2 Answers


If you are deferring the salary and translating it into a loan plus also receive some equity in exchange for this, then you have the advantage of both:
a) Receiving equity
b) A loan that is paid back when the company is profitable for example

This is more advantageous for you, but might not be something that the founders are happy with. Ultimately there is no one standard for this type of thing, it's up to you to negotiate it with the founders of the business.

answered Feb 22 '13 at 13:15
Rob Rawson
101 points
  • That should be "b) A loan that is paid back *IF* the company is profitable" as there's absolutely no guarantee he's ever going to see a dime of that. – Casey Software 11 years ago

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answered Jul 22 '13 at 21:30
1 point

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