“Will You Build My Site For Equity?”
“Will you build my website in exchange for equity?”
Every developer I have ever met has been asked this question before. Some hear it several times a month.
Some developers already work for funded startups, where the hopes are the company goes public, and they are on the ground floor of stock options.
With the exception of these already employed developers, everyone I’ve talked to has the same response that I do to this question.
“Thanks, but no thanks. I don’t work for equity. I’d be happy to build your site for my normal fee.”
You’re probably wondering why so many people are passing up such a sweet offer. This is a million dollar idea, after all.
Look, it’s nothing personal. There are some good reasons why I say no to working for the promise of future equity.
Most Startups Fail
90% of all startups fail — even well-funded ones.
Imagine how difficult it will it be for your business idea to succeed if you cannot even pay a developer to create it?
When you approach a web developer, and propose they build your idea for free, with the promise to share in the profits later, you’re communicating a few things.
- 1. You don’t value the developer’s time.
- 2. You have no funding or budget.
- 3. You have not done due diligence to research the costs involved in launching a web-based business or digital product.
But the majority of folks pitching equity-only compensation to a developer don’t realize this. Many people believe originating the idea is the most important part.
Most Ideas Have Already Been Done
This shocks most people to hear, but 99.99999% of all ideas have been done before.
Very few of us will ever have ideas that are unique.
But it is not so much the idea that matters, but how well you execute the idea.
Is Your Business Idea Sound?
A business needs to have market fit. It has to fill a need that people have, and that they are willing to pay for.
A new business needs to be promoted and marketed. “Build it and they will come” is a fantasy. If you have no money for web development, how do you ever hope to market your idea?
Most ideas take time to get traction. The developers willing to work and wait for future equity are already working (and getting paid) at startups already.
Developers Are Idea People, Too
Most developers have ideas of their own. If they are going to work for free, it is more likely to be on their own side projects than your idea.
There’s only so much time in the day. Developers have families to feed. They need to make money with the time they have.
I don’t work for equity, because 50% of zero is still zero.
Intentions of Inequality
Some people put there, not you, of course — but some folks out there, try to rope developers into doing all the work for only a portion of the glory. If the glory actually pays off in the end.
There are business “idea guys (and gals)” that want someone to do all the technical work, so they can attach their name to a project, when all they are contributing is the idea.
This is something no sane developer is interested in.
Partnerships mean that each side brings something valuable to the the table.
Web developers bring their know-how, their ability to create something, and their technical expertise to the dance. You should be bringing something valuable as well.
Please understand, I’m not telling you these things to upset or hurt you.
I’m telling you so you know what to expect.
And I also want to give you some valuable advice.
Get your web developer involved from the beginning — before you start making any technical decisions, and pay them for their expertise.
Misinformation Exists!
I’ve seen the misinformation that’s out there — even on reputable business sites.
Some articles that tell you if you get a technical partner, your “interests will be more aligned”. While that may or may not be true, if you’re not paying a technical partner, they aren’t going to be doing any work.
I’ve seen “business advisors” on forums telling you that paying a developer will give you poor results, because they work by the hour, and want to pad their wage. Or that hiring a web development studio may cost more, and be less risky, but they will be more inflexible.
While it’s true that there are WordPress developers that are setting a bad example for the rest of the community, they can be detected by doing your homework, and not looking in the bargain bin for someone to get your work done.
Web agencies or development shops are the same thing. They are usually lower risk, have a larger team, and cost more. But this alone doesn’t guarantee results.
Do your homework before hiring a development partner.
People You Hire Are Partners, Too
Perhaps that’s the biggest thing I want to stress. Good people will do a good job for you, if you treat them with respect.
Don’t come empty-handed to a web developer and expect them to do the heavy lifting for you for empty promises.
The developers that do agree to an arrangement like this are the ones I would worry about.
They don’t value themselves.
Ideas For Funding Your Idea
Any developer running a real business and not a hobby will expect to be paid in cash.
So, you have an idea, but not enough money to hire a developer to help you. What do you do?
One solution would be apply for a small business loan. You could also start saving up to get your idea built out.
You could also crowd-fund your idea through a platform like Kickstarter, Indiegogo, or GoFundMe. This might also give you a good idea of how much demand there is for your product or resource.
Summary
To recap: realize that ideas are plentiful, and it’s likely your business idea has already been done before. Most startups/business ideas don’t pay off like people expect them to. It takes a lot of work to make a business grow.
Working for the promise of future profits is incredibly risky for the web developer who might consider that offer. Because web developers have bills to pay, we usually want to be paid in money for our work.
Success comes from executing on an idea and continuous, iterative work on that execution.
Quality costs money. Only chumps work for free.
Do your research, and find someone who will deal fairly with you, and you’ll have an ally in your corner for years to come.
Hey John,
Great article. “Quality costs money. Only chumps work for free.” This line really stood out to me. Everyone thinks that they have the next “million dollar idea,” but they rarely do. We recently wrote a similar article explaining why we don’t work for equity either — please take a look if you have time. Cheers from Auburn!
Alex
Hi Alex:
Your article speaks to many people who have gotten caught up in someone else’s dream of the million dollar idea.
Basically, these all add up to someone providing the “big idea”, and the developer(s) doing all the work. More than likely to the tune of zero customers. No thanks.
It makes one ponder, “If the idea is so precious, why is someone so eager to give away equity in it?” Or, why is no one willing to lay down some cold, hard VC cash to invest in it?
As you know, many ideas come from people who have not had any experience with the digital product cycle. They do not know the peaks and valleys of development, or what the entrepreneurship in the digital landscape looks like.
I’ve come to the same conclusion that Jay Nine has — I run a business, not a line of credit.
You might appreciate a piece by my friend Christopher Hawkins, entitled The Freelancer and the Guaranteed Millions.
Enjoy.
The reason an entrepreneur tries to get a developer to work for equity is because he doesnt trust the VC route. He will just be told no, then get his idea stolen. The other dilemma is that most programmers will sell you on their expertise, then have no clue down the road (and thousands of dollars later) how to get the project over the goal line because it requires skills they dont have and cant get. Plus there is a distinct generation gap, and most young programmers are slackers with no work ethic. So the best route is to pay them nothing at first and see whether they are worthy of a paycheck later, because the ones Ive paid have, in a word, sucked.
Hi Jay:
It’s unfortunate that you’ve had disappointing experiences. I will disagree that ineffectiveness is a generational thing. There are brilliant developers and also people barely skating by in every generation. One thing you might do to improve your experiences going forward is find a developer platform that has devs who are strictly vetted by experts, like Codeable.io. I wish you best of luck.
– JL