If you’ve been building websites long enough, you will no doubt get the inevitable pitch to build a website for someone’s new business idea. For free. They won’t say it’s for free, they’ll offer you something even better than free- they’ll offer you ‘equity’, part ownership in their new business.
This exchange is commonly referred to as ‘sweat equity’: if you put in your sweat and blood for free, you’ll be rewarded in equity, a percentage of ownership of the future billion dollar profits the website is likely to make. Having been burned by this idea once or twice in my early career, I have a hard rule of never trading my work for future equity. Equity in an already existing and financially solvent business? Maybe. Plus cash? Now we’re talking. Here’s my rule: If someone needs web development work, but doesn’t have the cash on hand to purchase it, that’s a red flag.
What is your investment
Just because you’re not being asked to invest your money, you can’t forget that your time is money. So do the math. Convert their broad request into a quantifiable ask.
For the sake of easy numbers, let’s imagine this new idea looks like a 100 hour project, and you typically charge $100/hr. At the end of the work, you’ll have “invested” $10,000 into this business. That’s not imaginary money, that’s $10k in cold hard cash that you could have been making from paying clients.
Now imagine that this same person came to you and just asked for the $10k. What would you think? How would you respond? How long until the laughter subsided? Except- you don’t have to imagine it, because that’s exactly what they’re asking for when they ask you to work for free.
Fighting the FOMO
Equity is an enticing temptress. The future feels like a lottery ticket, and we’re all influenced by success narratives like this:
Lucas would have made more money if he’d given Jobs 99% of the company for free. https://t.co/DrmzdGIEjp— Paul Graham (@paulg) February 3, 2022
The idea here is that any idea might bring massive success, a 100x return, and a vacation house on a private island. This happened to enough people to make it feel achievable. People win the lottery, too, and so those tickets keep selling. But the odds truly are against you. I’ll admit that every time I get one of these pitches, there is the small voice of FOMO in the back of my mind: you could be missing a huge opportunity here.
I got ideas
The reality is that you’re investing in two things: 1) a person and 2) their business plan. You’re not investing in their idea. If someone wants you to work on their idea, ask for their business plan.
These days most ideas follow the same formula: “It’s like X but for Y”. It’s like Uber but for juice cleanses, it’s like Yelp but for churches, it’s like Facebook but for incels. Good ideas are easy to come by, good execution is not. Ultimately you’re investing in the execution of an idea. Worse, it’s not just your execution, but the other stakeholders as well. You’re relying on their follow-through to make your equity worth something.
In my opinion, if an idea is any good, they should be able to get someone else to invest. If they had someone else contribute the $10k, you could actually get paid for your work. The question is, is this person and their business plan worth being a $10k investor in? If so, let them convince someone else. If you truly believe in this person and their business plan and WANT the equity, you could still wait until they raise the capital.
Trading work for equity is speculative. In other words, it’s gambling. If you’ll be completely happy walking away with nothing, with losing all the time you put into it, with potentially ruining your personal relationship with this other person, then feel free to take the risk. I don’t, because I’ve learned that I am truly terrible at gambling.