Ok, ok, so maybe the title is a little harsh, but I’ll explain to you what I mean about money talking and partnerships potentially being a bad thing for you.
Here’s the situation (re: dream):
You have this awesome, perfect, terrific, super cool idea that you really want to implement and bring to the market ASAP, but…. you don’t have much capital so the first thing that you think about is: “Ok, no problem. I’ll just get a designer and coder and pay them in equity. The designer will get 30% and the coder will get 30% and I’ll be golden with my 40%. Awesome, I can get this company up and running and I won’t have to pay a cent! YAY! Righteous!
Here’s the reality:
Most people are not going to be motivated by equity in your company no matter how spectacular your idea is. At least not talented individuals. Doesn’t make sense to you? Well here’s the deal: time equals money and money equals time.
I have no doubt that you will be able to find a decent supply of talented people who would be more than willing to be a part of your project, but 9 out of 10 times “money” will be the driving force behind their support for your project. Not faith in your vision. Sorry, buddy.
It’s never going to be as easy as it sounds: “Equity for your skills.” Sounds nice, but no dice. As an entrepreneur, you have to understand that people need to eat, live, and survive and that can only be done with money, not equity in a company that will succeed in “theory.”
Sure, there will be times that you can find people who will be willing to dish out countless hours for a nice share in your project, but it’ll be one of the hardest tasks that you can ever face as an entrepreneur and the level of commitment can be very shaky in these situations.
I tried this approach 2.5 years ago with a company that I was creating. I spent months setting up a team of a design, coder, and a few writers. Initially, they were all super enthusiastic about the project, but the test of time proved otherwise and within a few months, their attentions wavered and the project was ripped asunder.
Looking back, if I was — at the very least — paying them some sort of money for their time, I think the situation would have been more promising. And if you’re dealing with college students, you better be prepared for fickle minds when it comes to staying involved in projects.
Yup, yup… So now what?
Do whatever you possibly can to raise capital to “hire” people to bring your dreams to reality. Forget spending weeks and months trying (re: begging) people to be your partner for an equity stake in your company.
Sell your car, get a job, ask your parents for money, whatever it is that you have to do to raise the necessary startup cash that you need and focus more time on finding the right people to hire, than finding people to partner with.
In the end, you’ll retain full ownership of your company, have 100% creative control, and I truly believe that your life will be much less stressful as a result.
99% of the time, you’ll need money if you want talent.
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I’ve known people like this that try to promise and sell the dream of “We’ll pay you when we get rich and then we’ll all be rich together”.
I’ve never much believed in these plans myself. Even the non-half-assed ones seem a bit to half-assed. Personally the best dynamic you could have is maybe your and another person that you go in with and they are just as nuts as you to see this idea through… other then that. Anty up! I don’t know anyone that works for free that isn’t already wealthy.
Luc
Dave,
Couldn’t agree with you more. Your example sounds familiar.
@Lucas: Yeah, I agree. If you can find another person just as intense and ambitious (re: crazy) as yourself, then you’re in the money!
@Anthony: Hahaha… yeah it does sound familiar, doesn’t it..
Might be true in some cases, but in others you would be silly not to take equity. You have to look at the opportunity and the reality of the idea. I would happily work for equity if the idea was there – but you’ll have to do a mighty fine job selling it to me
Most ideas suck, you just have to find the right one.
@Rose: I think that it’s true in most cases. Most of the time people simply want to be paid, not wait around to “possibly” make money. Sure, it depends on the situation and many other factors unique to each project, but overall, I stand by my feelings towards equity for participation — just not all that feasible in most situations. Yup, most ideas are weak, indeed. But the persistent entrepreneur always keeps his/her head up no matter what!
Are you trying to talk an entrepreneur into working with you or an average joe? I’ve had a range of ideas pitched to me by entrepreneurs and there are a couple that I would work for equity in. In the end it is a risk/return equation, if I can see the equity realistically being worth more than doing the job for cash I’ll take it. However if 9/10 businesses fail pretty quickly and I’m picky with my ideas that doesn’t leave many equity deals worth going for around.