Carta Collective

Most of the advice I've solicited on this topic says you should never give a contractor equity. I have a contractor who is building an app for my startup (we have the backend built ourselves) and he's open to accepting half in equity for his work on the project. 

Many people have told me "don't give equity to anyone who you don't imagine working on the startup for 5 years or so" and I can understand that. But on the other hand, giving equity to a developer also means he believes in the project, will be more invested in the success of the startup, and deliver higher quality work. My reasoning for wanting to do this is that I'm short on cash. I've raised $25k angel investment for the startup so far and this development cost is $12k, so giving some equity could reduce that to $6k.

Thoughts? I'm just generally curious why people are so against this.

Most of the advice I've solicited on this topic says you should never give a contractor equity. I have a contractor who is building an app for my startup (we have the backend built ourselves) and he's open to accepting half in equity for his work on the project. 

Many people have told me "don't give equity to anyone who you don't imagine working on the startup for 5 years or so" and I can understand that. But on the other hand, giving equity to a developer also means he believes in the project, will be more invested in the success of the startup, and deliver higher quality work. My reasoning for wanting to do this is that I'm short on cash. I've raised $25k angel investment for the startup so far and this development cost is $12k, so giving some equity could reduce that to $6k.

Thoughts? I'm just generally curious why people are so against this.

Most of the advice I've solicited on this topic says you should never give a contractor equity. I have a contractor who is building an app for my startup (we have the backend built ourselves) and he's open to accepting half in equity for his work on the project. 

Many people have told me "don't give equity to anyone who you don't imagine working on the startup for 5 years or so" and I can understand that. But on the other hand, giving equity to a developer also means he believes in the project, will be more invested in the success of the startup, and deliver higher quality work. My reasoning for wanting to do this is that I'm short on cash. I've raised $25k angel investment for the startup so far and this development cost is $12k, so giving some equity could reduce that to $6k.

Thoughts? I'm just generally curious why people are so against this.

Founder of bubbles here.

I do give contractors equity, but only when we expect to work together long-term. I typically assign 4 years of equity with a 1 year cliff, and determine the equity amount based on our valuation.

This also incentivizes the contractor to do good work because they'll want to make sure you don't terminate within the 1 year cliff.

Most of the advice I've solicited on this topic says you should never give a contractor equity. I have a contractor who is building an app for my startup (we have the backend built ourselves) and he's open to accepting half in equity for his work on the project. 

Many people have told me "don't give equity to anyone who you don't imagine working on the startup for 5 years or so" and I can understand that. But on the other hand, giving equity to a developer also means he believes in the project, will be more invested in the success of the startup, and deliver higher quality work. My reasoning for wanting to do this is that I'm short on cash. I've raised $25k angel investment for the startup so far and this development cost is $12k, so giving some equity could reduce that to $6k.

Thoughts? I'm just generally curious why people are so against this.

@Tom Medema very helpful to know. Do you find that contractors are interested in working contract positions for that long? Do you ever offer to convert it to a full time position? 

Founder of bubbles here.

I do give contractors equity, but only when we expect to work together long-term. I typically assign 4 years of equity with a 1 year cliff, and determine the equity amount based on our valuation.

This also incentivizes the contractor to do good work because they'll want to make sure you don't terminate within the 1 year cliff.

Most of the advice I've solicited on this topic says you should never give a contractor equity. I have a contractor who is building an app for my startup (we have the backend built ourselves) and he's open to accepting half in equity for his work on the project. 

Many people have told me "don't give equity to anyone who you don't imagine working on the startup for 5 years or so" and I can understand that. But on the other hand, giving equity to a developer also means he believes in the project, will be more invested in the success of the startup, and deliver higher quality work. My reasoning for wanting to do this is that I'm short on cash. I've raised $25k angel investment for the startup so far and this development cost is $12k, so giving some equity could reduce that to $6k.

Thoughts? I'm just generally curious why people are so against this.

Most of the advice I've solicited on this topic says you should never give a contractor equity. I have a contractor who is building an app for my startup (we have the backend built ourselves) and he's open to accepting half in equity for his work on the project. 

Many people have told me "don't give equity to anyone who you don't imagine working on the startup for 5 years or so" and I can understand that. But on the other hand, giving equity to a developer also means he believes in the project, will be more invested in the success of the startup, and deliver higher quality work. My reasoning for wanting to do this is that I'm short on cash. I've raised $25k angel investment for the startup so far and this development cost is $12k, so giving some equity could reduce that to $6k.

Thoughts? I'm just generally curious why people are so against this.

Most of the advice I've solicited on this topic says you should never give a contractor equity. I have a contractor who is building an app for my startup (we have the backend built ourselves) and he's open to accepting half in equity for his work on the project. 

Many people have told me "don't give equity to anyone who you don't imagine working on the startup for 5 years or so" and I can understand that. But on the other hand, giving equity to a developer also means he believes in the project, will be more invested in the success of the startup, and deliver higher quality work. My reasoning for wanting to do this is that I'm short on cash. I've raised $25k angel investment for the startup so far and this development cost is $12k, so giving some equity could reduce that to $6k.

Thoughts? I'm just generally curious why people are so against this.

Our opinion on the subject is a bit biased. Everything that we create, acquire or turn around is all 100% equity based. Our model is rooted in creating a worker owned collaborative. So giving equity from the beginning is the goal. 

This gives our founders ownership, ownership creates pride and drive, which in turn helps us get the business off the ground faster than the slow process of raising or finding sources of capital. It's a metaphorical "barn raising" where a community comes together to create the things that they all will find a benefit in future use from. 

This works for us because the sooner we can hand over full control the better.

However, for the founder that wants to retain control of their vision and guide the venture to the goals that they see in their mind it could be very problematic. Giving equity is equal to giving control, which comes with a slew of potential problems and frustrations, and could potentially lead to being pushed out of your own house to watch someone else take your "baby" away. Not fun at all for anyone emotionally tied to the out comes of what they are trying to bring life to. 

So, in our opinion and experience, if a founder is building for exit, then equity makes sense. If a founder is building something that they want to see as a job or their life's work or want to pass it down to their family's future generations with "a one person at the helm"mindset, this needs to be thought through to make sure that it is going to someone that they can work with indefinitely and has the best intentions for their creation.

This is a deeply personal question for a founder who is not building for exit. Only you can make that choice and the "how" needs to be planned out every  step of the way to make sure that they can maintain their ability to make the choices without outside or inside interference.

Well, I talk way too much and if you've made it this far then I owe it to you to shut up. LOL love and light…

Joshua

General Manager/Owner/Founder

Lyonides Ventures

Most of the advice I've solicited on this topic says you should never give a contractor equity. I have a contractor who is building an app for my startup (we have the backend built ourselves) and he's open to accepting half in equity for his work on the project. 

Many people have told me "don't give equity to anyone who you don't imagine working on the startup for 5 years or so" and I can understand that. But on the other hand, giving equity to a developer also means he believes in the project, will be more invested in the success of the startup, and deliver higher quality work. My reasoning for wanting to do this is that I'm short on cash. I've raised $25k angel investment for the startup so far and this development cost is $12k, so giving some equity could reduce that to $6k.

Thoughts? I'm just generally curious why people are so against this.

Our opinion on the subject is a bit biased. Everything that we create, acquire or turn around is all 100% equity based. Our model is rooted in creating a worker owned collaborative. So giving equity from the beginning is the goal. 

This gives our founders ownership, ownership creates pride and drive, which in turn helps us get the business off the ground faster than the slow process of raising or finding sources of capital. It's a metaphorical "barn raising" where a community comes together to create the things that they all will find a benefit in future use from. 

This works for us because the sooner we can hand over full control the better.

However, for the founder that wants to retain control of their vision and guide the venture to the goals that they see in their mind it could be very problematic. Giving equity is equal to giving control, which comes with a slew of potential problems and frustrations, and could potentially lead to being pushed out of your own house to watch someone else take your "baby" away. Not fun at all for anyone emotionally tied to the out comes of what they are trying to bring life to. 

So, in our opinion and experience, if a founder is building for exit, then equity makes sense. If a founder is building something that they want to see as a job or their life's work or want to pass it down to their family's future generations with "a one person at the helm"mindset, this needs to be thought through to make sure that it is going to someone that they can work with indefinitely and has the best intentions for their creation.

This is a deeply personal question for a founder who is not building for exit. Only you can make that choice and the "how" needs to be planned out every  step of the way to make sure that they can maintain their ability to make the choices without outside or inside interference.

Well, I talk way too much and if you've made it this far then I owe it to you to shut up. LOL love and light…

Joshua

General Manager/Owner/Founder

Lyonides Ventures

Most of the advice I've solicited on this topic says you should never give a contractor equity. I have a contractor who is building an app for my startup (we have the backend built ourselves) and he's open to accepting half in equity for his work on the project. 

Many people have told me "don't give equity to anyone who you don't imagine working on the startup for 5 years or so" and I can understand that. But on the other hand, giving equity to a developer also means he believes in the project, will be more invested in the success of the startup, and deliver higher quality work. My reasoning for wanting to do this is that I'm short on cash. I've raised $25k angel investment for the startup so far and this development cost is $12k, so giving some equity could reduce that to $6k.

Thoughts? I'm just generally curious why people are so against this.