So you want to share equity with your developer?

While I was actively involved in software development not a week passed without someone offering equity for “working on their idea that will generate millions”. Problem is that people do not understand that ideas, without the means to execute — are not worth anything.

The time where a person would go and get an MBA, and then go and find a code monkey to do his bidding is long gone. You also need to understand that a developer is choosing whether to partner with you and not the other way around. You need to ask yourself what business skills are you bringing to the table that the developer already does not have or that he or she cannot learn as they go.

The Developer is the golden child. Good ones are already booked a few months in advance. They have a steady source of income and relationships with existing clients.

Wyatt from the Lean Startup Circle said it well “Experienced contractors have been making money selling pick-axes for a while and watching those people who have bought the pick-axes return home from the gold rush empty-handed. Even though the prospector is sure that he’ll find gold, the contractor can evaluate the situation with more detachment and realize that there is a high amount of risk involved.”

Furthermore, you need to understand that 50% of nothing is still — nothing. The Developer will have to put his skills and efforts to work right away. That is labour he could have billed for if he was working for someone else. But you, as a “business guy” will have the luxury of “waiting it out”. You will be able to wait until the prototype is done and see if the idea is still viable or not. 50% (or whatever %) only becomes relevant once the model is validated by market.

There is (and always was) a strong demand for good developers. That means you need to have a strong offering to attract them. And I am sorry to break it out to you but strong offering means cash + equity. It reduces developers risk and proves that you as a “business guy” can actually make or raise money.

What goes to your advantage is that startup developers realize they will be paid about 30% less than their counterparts in established companies but they will have a more fun and fulfilling experience.