You've Been Offered Equity to Build Something

Somebody has an idea and they want you to build it. They are excited, they have thought about this for a long time, and they are offering you a percentage of what it becomes. Maybe a title. Maybe a salary that starts once the funding lands. They are not lying to you, or at least most of them are not. They believe every word, which is what makes this hard to think about clearly.

Two days ago I published the other half of this, written for the person making you this offer. It tells them to pay for work, to keep the first piece small, and to stop asking builders for coffee. I would rather both sides read both, because most of these arrangements go wrong through ignorance rather than malice, and the fix is usually that somebody knew what fair looked like and said so early.

This is the builder’s side.

What you are actually being offered

Strip the excitement out and price the components separately, because they are wildly different in value.

The equity is a lottery ticket. Not worthless, and not money. Equity in a pre-revenue company has no buyer, no market, and no way to convert into rent. The tell that settles its value is the direction of flow: people trade labor for early equity constantly, and almost nobody trades cash for it at the same valuation. If it were worth what the cap table says, somebody would buy it.

The title is free to give. CTO of a company with no revenue and no employees is a word. It may be worth something to you for your own reasons, and there is nothing wrong with that. It is not compensation.

The salary that starts later is a promise about a future somebody else controls. It starts when the round closes, or when revenue hits a number, or when a customer signs. Every one of those is outside your control and inside theirs.

The idea is worth very little, and you should be careful how you say that. Ideas are common and execution is rare, which is precisely why they are recruiting you. It is worth knowing this and it is not worth being smug about, because you are about to ask them to respect what you bring.

What is real and immediate is your time, which is the only thing in the arrangement that cannot be created later. That asymmetry is the whole thing. Take the Bait, Eat the Poison is the general form: you give something real now and receive something enormous later that is unspecified and administered by the person offering it.

Price the components separately. Your time is the only part of this that cannot be created later.

The questions that end it in ten minutes

None of these are hostile, and how they are received is most of the signal.

Is there revenue? Not a waitlist, not letters of intent, not a pilot. Money that arrived. This single question sorts the entire field, because everything else changes meaning depending on the answer.

What have you put in? Not enthusiasm. Money, or a year of unpaid nights, or customers they personally sold. If you are being asked to take all the risk while the other side risks an idea and some evenings, that is the deal, and you should see it clearly before deciding whether you want it.

What happens if I build it and it doesn’t work? Listen for whether they have thought about it. Somebody who has only imagined success has not thought about the business, they have thought about the outcome.

What are you going to be doing while I build? There is a good answer, and it is specific: selling, recruiting customers, raising, handling the domain expertise you do not have. A vague answer means you are being asked to build and market and support a product in exchange for a minority of it.

Who else have you talked to? If you are the eleventh developer, that is worth knowing. It might mean the offer is bad. It might mean the first ten were not right. What you want is whether they will tell you.

Can we start with a small paid piece? The most useful question in the set, and the one whose answer you should weigh most heavily. It is covered further down.

What a good founder to build for looks like

This mirrors what I told them to look for in you, and I want the symmetry to be visible because it is the actual argument.

They have done the unglamorous part. They have talked to twenty potential customers, or run the manual version of the service by hand for six months, or sold something before it existed. Somebody who has validated without a technical partner is showing you they can do work that has no glamour attached.

They can say what success looks like in numbers. “Two hundred paying users at forty dollars a month by the end of the year” is a target you can build against and check yourself against. “Change the industry” is a mood.

They cut scope when you explain a cost. You say a feature is three weeks and they ask what the one-week version looks like. That is a person who will still be reasonable when the project is going badly.

They pay for something before asking for everything. A founder who finds money for a small first engagement is telling you they understand that work has a price. One who cannot find any money at all is telling you something about the next twelve months.

They answer questions in a day. You will learn this in the first two weeks and it predicts the entire relationship.

They are honest about what they don’t know. “I don’t understand the technical side, that’s why I need you, and I’ll defer to you on it” is a good sign. So is the reverse, someone who knows their domain cold and can teach it to you.

The offer that is worth taking

I am not against equity. I am against equity as a substitute for thinking about what you are worth.

There is a version of this that is genuinely good, and it looks like this. There is revenue, or there is funding in the bank. You are paid something real, even if it is below your rate. Equity is on top rather than instead, it vests over time, and the agreement is written by a lawyer and says what happens if you leave, if they leave, or if the company is sold. You have worked with this person on something small and it went well. And you would want the job even if the equity turned out to be worth nothing.

That last one is the test that resolves most cases. Strip the equity out entirely and ask whether the remaining arrangement is one you would accept. If yes, the equity is upside on a deal that already works. If no, the equity is being used to make an unacceptable deal acceptable, and it cannot do that, because it is a lottery ticket.

Start small, in both directions

The advice I gave the hiring side was to make the first piece small, pay for it, and learn how the other person works. That protects you at least as much as it protects them.

Propose a scoped, paid first engagement. A few days. A defined outcome. A fixed price. A technical review with a written plan, or one feature built and deployed.

What you learn in that window is worth more than any amount of due diligence. Do they answer questions? Do they change their mind constantly? Do they respect the boundary between your work and your evenings? Do they pay the invoice without being reminded? You cannot find any of that out in meetings, and meetings are where these arrangements are usually decided.

It also gives you a clean exit that costs nobody anything. If it is not right you have been paid, they have something useful, and no one has to have a difficult conversation about a percentage.

Watch how they react to the proposal. Someone who takes the business seriously will often improve it. Someone who needs you to commit to everything before anything can start has told you where the value was going to come from.

How this goes wrong

The bad version rarely announces itself, and it does not usually involve a bad person.

It starts with a few weeks of work on trust. Then there is a reason the paperwork is delayed, and the reason is legitimate. The percentage that was discussed is smaller when it appears in writing, or it appears with terms nobody mentioned. The funding is close. Then it is close again.

Somewhere in there you stop being able to leave easily, because you have eight months in it, you have told people what you are working on, and walking away means all of that was for nothing. That is the same trap in the spec work spiral, and the engine is not their persuasiveness. It is your own investment, which grows every week and makes each next week feel cheaper than quitting.

The version that hurts most is the sincere one. They meant it. The funding genuinely was close. Nobody set out to take anything from you, and there is no villain to be angry at, which somehow makes it worse rather than better.

The defense is the same either way, and it is not suspicion. It is paper, a small first piece, and a decision made before you were emotionally invested about what you will and will not do.

What you owe them

If you take the work, be worth what they are paying, including when the payment is partly speculative.

Tell them what things cost before you build them, not after. Say no to features clearly and explain the trade in terms of their business rather than your architecture. Do not disappear, and if you are going to be late say so early, because a client can plan around a delay they know about and cannot plan around silence.

And be honest about the parts you are not good at. The most damaging thing a builder does to a non-technical founder is let them believe the technical side is handled when it is not, because they have no way to check and will find out at the worst possible moment.

Nobody has to lose

The reason I wrote these two posts together is that almost every bad version of this comes from one side not knowing what the other side’s reality looks like.

The founder does not know that a two-hour coffee costs you real money, that an unscoped estimate is the job done for free, or that their percentage has no buyer. You do not always know that they have put their savings in, that they have been told by everyone around them that this is how it is done, or that they are being taken advantage of from three other directions at the same time.

A fair deal is not a compromise where both sides give up something they wanted. It is an arrangement where each side can describe what the other brings without using the word potential, and where both are exposed if it goes badly. Those exist. They are more common than the horror stories suggest, and they are what most of my work has been for twenty-five years.

You do not have to take a bad deal to be part of something. Building things is genuinely good work and turning an idea into money is one of the more satisfying things a person can do. It just has to be real, and it has to be fair, and nobody has to lose for you to win.

Frequently Asked Questions

Should I build an app for equity instead of pay?

Rarely before there is revenue or money in the bank. Equity in a pre-revenue company has no buyer, so it is upside rather than compensation. The test that resolves most cases: strip the equity out entirely and ask whether you would still take the deal. If yes, the equity is a bonus on an arrangement that already works. If no, it is being used to make an unacceptable deal acceptable, which it cannot do.

How much equity should I ask for to build an MVP?

The percentage matters far less than what it is attached to. A large slice of a company with no revenue, no written agreement, and no vesting schedule is worth less than a small slice with paper, a cliff, and a founder who pays invoices. Settle whether there is real compensation first, get the vesting in writing before you start, and treat the number as the last question rather than the first.

How do I evaluate a non-technical founder before working with them?

Ask whether there is revenue, what they have personally put in, and what they will be doing while you build. Look for evidence of unglamorous work already done, such as talking to customers or running the service manually for months. Then propose a small paid first engagement, because two weeks of real work tells you more about how somebody behaves than any number of meetings.

Is a CTO title at a startup worth taking?

Treat it as free to give, because it is. CTO of a company with no revenue and no employees is a word rather than compensation, and it can be withdrawn or diluted when real money arrives and investors want their own people. It may be worth something to you for your own reasons, which is fine. Just do not let it stand in for pay or for a written agreement.

What should be in writing before I start building for equity?

The percentage, the vesting schedule and cliff, what happens if either side leaves, what happens if the company is sold, who owns the code, and what you are actually responsible for. Verbal promises about percentages are common and worth nothing, because memories diverge and companies change shape. Anybody serious expects this conversation and will not be offended by it.