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How to tackle folks here who want you to "work for free" now and "get compensated later"?

I have been getting requests followed by interviews, where I can easily deduce that the founders and their co-founder(s) want me to work for free now to build an MVP but expect me to say "remember my effort" so that when things start flying / some funding comes in, compensate me then with equity or money.

Does that sound absurd to others here as well or is that something I expect from most of the folks here?

I am willing to work on a MVP, put in the required hours if not full time, but not for free. I understand that cash may not be there pre-funding, but at least offer a 5% equity (if all works out), even if you are approaching me as an employee and NOT as a co-founder.

50 Replies

Shobhit Verma
9
1
Shobhit Verma Entrepreneur • Advisor
building an adaptive recommendation engine
This happens way too often than one would think. Even from former CEOs of multi million $ companies and seemingly well connected folks who are on boards of several companies.
There are some genuine people out there who are not trying to take advantage of the developers, but the signal to noise ratio is so low that to be efficient with time, most of my friends say "no", unless there is something else concrete that you are getting out of that exercise (favor to a friend, learning a new market/technology, non-public data :) )

Neil Licht - HereWeAre
5
4
Want To find-close Business Online without competition Before They Google Search? We solve this problem 1(508)-481-8567
NO!!! You don't work for free in the unofficial hopes that these folks will compensate you when they have "income". Remember they need you to be able to move into their next phase and they know that. They not you will define "when they have the income" to pay you so you can't win that arrangementever.

Why would you consider such an offer from a group with no solid business, no real assets, no income and no real immediate promise of income?

If you do so now, you will always be asked to "help out" for free by the curent and future opportunities. More and more will be asked of you for free and ultimately, you will say no more. Problem is that you gave what theses folks needed away already for free and they are using it to build the business so they wont care when you say no more. Don't go down that path.

Equity? - Its worthless because until the company goes public and you can sell your shares at a decent price or the company gets sold, there is no equity value to speak of at all.

Are the folks asking you to work for free expecting not to eventually pay themselves based on your exceedingly valuable work? I'll bet not.

Never put a value on yourself and your ability that is even close to free because its worth way more than that.

- They dont have the talent onboard tht you bring.
- Your skill and work is needed to get them going

You dont have to take the gamble that they are taking on their business idea, period. They need to pay for you and your contribution in a very tangible immediate way.

Donteven think of working for free and that is also defined as imaginary equity that can only be realized when and if the company gets sold or goes public.
Anselm Waterfield
6
0
Anselm Waterfield Entrepreneur • Advisor
Working with and looking for Software Businesses with growth in mind
Working for free perhaps isn't the issue; rather thinking about the value of your time and translating that into some "perceived value" and comparing that against the "perceived value" and the risk associated with what's on offer in the future. Setting out a clear expectation and writing it down early will also be important, this proves alignment of understanding and will make for a smoother ride ahead. I have found a useful tool that provides a framework for this here http://slicingpie.com/grunt-fund-cheat-sheet/. All the best A
Stephen Cataldo
3
1
Stephen Cataldo Advisor
Drupal | Startups | Green Conferences | Carpooling | Strategic Planning During Conflict
There's still not an efficient market for unfunded founders to founder-date with developers. This q&a is full of conversations by less-technical founders desperate to get developers to help them, but there's no vetting (so tech people listen to the same pitches over and over till they can't listen anymore), and no quick language to help people doing this for the first time -- if you're not getting paid, you should be some aspect of a respected founder, even if a small-slice, not offered vague promises. Working on someone else's dream is a much bigger favor than being given an idea to work on: if they don't realize that, and won't even promise you that an actually-working MVP will get you a well defined slice of their mere pipe-dream, run.

Slicing Pie is a really good place to start -- perhaps ask them to read it or read a blog about it. As a developer working with people who just have an idea and some marketing skills, field expertise and contacts in the field and enough money for a marketing budget and servers and so on, even then if they don't value your time, hour per hour, as at least equal to theirs, I wouldn't do it. Not many of these ideas go anywhere.
Steven T.A. Carter
3
0
Steven T.A. Carter Entrepreneur • Advisor
Chief Operating Officer at 1PEL Inc.
This is an interesting topic. I have an idea, I need a tech guy to help me, but I'd never dream of not making it worthwhile. If I had the cash, I'd just pay a contractor to build it. They get paid their rate, I get my product. If I don't have the cash, then I'd be prepared to give significant equity and explain what I am bringing to to the table other than the idea (marketing, sales and operational experience). I tend to agree that you shouldn't work for free on a promise. At least a significant chunk of equity in a signed contract has a potential to be worth something. A future promise of some payment of some kind isn't real at all.
Michael Barnathan
2
0
Michael Barnathan Entrepreneur • Advisor
Co-Founder of The Mountaintop Program, Google Alum
Hmm, my email reply never posted.

Vague promises are worth the paper they're printed on. Startups have two forms of compensation: they can compensate with cash (which is just as good as money), or they can give away pieces of the business, which are essentially assets representing the potential to earn future cash (which is nowhere near as good as money, which is why the upside should be a significant multiple of cash comp).

Distill it down to the risk and contributions to the business: you're spending weeks to months of your valuable time creating their product. The product that they hope will make *them* rich. The product that they're going to sell to people and demand money for. And when customers encounter issues with the product, they're going to bug you about fixing them. *Why on Earth* would you allow other people to get rich off of your work while you do without?
Aleksandra Czajka
6
3
Aleksandra Czajka Entrepreneur
Freelance Senior Software Engineer, Developer, Web Developer, Programmer - Full Stack
Educate them....in an email. Don't waste your time with interviews.

I get about 5 requests like this a day now. From FD, LinkedIN, AngelList and others. I used to reply to them, but now I simply don't have the time. However, I am a consultant 100% of my time working through my single-operated LLC. So, I do need to find projects. My first communication with someone that reaches out to me is asking them whether they are thinking of a paid contract or pure equity. If it's pure equity. I tell them that first, it won't work for me because I need to get paid for my work, and, second, it doesn't work for them because the only reason they're doing that is because they don't have any money and not because it's good for their business. They don't want to take the risk to raise money for their idea... but they're asking me to take the risk with my own time = money? That is really disrespectful and you should educate them on that.

Now, the first time you write that, they will reply. Oh, they'll reply. With something like 1. Oh, you got us all wrong, we are 100% confident our idea will pan out, 2. You tech type are all the same - you don't get the idea behind risk and don't see what a great opportunity this is, 3. I don't have the money, what do I propose I do? 4. But we had a guy that was doing the same thing he just had to <go do something>.

Your responses should be, 1. Just because you want your business to win, doesn't mean it will. And, it has less chances of winning when the backbone of your product isn't being paid and can walk at any moment. 2. If you're any different than us tech types, why don't you drop what you're doing and come work for free for me? I'll pay you, just a year or two from now. 3. This is not my problem. You decided to start a company without a plan and now your last resort is to not pay your employees. Why are you looking to me to solve your business plan? 4. Just because you found one fool, doesn't mean we all are.

The most important advice is this, figure out in the first communication whether they're going to pay you. If you don't, any other communication is a waste of your time. Having multiple interviews just to find out they're not going to pay you is way too far into the process. Find out in the first email. Second, don't even think about doing deals like these. There's so much wrong with this. Just the fact that these guys obviously don't believe in their product, because if they did, they would raise money and take the risk themselves. Rather than monkey around, change the concepts of capitalism and chance on someone for free.
JC Niederberger
0
1
JC Niederberger Entrepreneur
Global Payments, Treasury & Risk Solutions
If you value your time at zero...then why would anyone else value it greater than zero? Deferred compensation comes in many forms. If you are willing to work for "free" now and a promise later then at least get it in writing what you will SPECIFICALLY receive at various benchmarks achieved. If its equity...get a chunk...at least 25% upfront, vested...before your first day. Once you start...you lose all negotiating power.
Tim Kilroy
15
0
Tim Kilroy Entrepreneur • Advisor
Analytics - LTV - Boosting Profits - Digital Marketing
I get the outrage - and it IS fair that consultants get paid. Often you are dealing with a founder who has no resources, so they have to beg, borrow and promise. They aren't trying to screw you, but often the entrepreneur is trying to make the impossible, possible - and finding delayed compensation is a tool to help you achieve the impossible.

Don't be outraged that someone asks you to do labor or for expertise without immediate compensation - just make it clear in your early discussions that you need to be compensated in cash. If you would entertain getting compensated in equity, then don't be surprised if the founder jumps all over that - equity is a currency that they have and value highly - and they can spend it on you and get what they need in order to make that equity worth more, what a fantastic win.

But their goal is not to extort anything from you, but rather to pay you with what is most valuable to them - a part of their dream. Don't look askance at that - dreams are most powerful when shared. But if you don't want to, or can't work for equity, then make it clear and move on. No harm, no foul.

And here is a prospecting tip for consultants/programmers/designers/etc. - startups pay like crap. You aren't going to get market value for your services because they typically lack cash. So, if that is your concern, rev up your sales game and target bigger fish. Startups use low cash compensation and shared opportunity as their currency. Don't be offended - it isn't because they don't want to pay you - most often, they can't.
Aleksandra Czajka
4
10
Aleksandra Czajka Entrepreneur
Freelance Senior Software Engineer, Developer, Web Developer, Programmer - Full Stack
If a start-up business cannot pay it's employees, it is failing. It should get an investment or go out of business. Capitalism is not achieved on the back bone of free work.
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