Equity for Effort: An Experiment
Providing compensation for open-source development
At Parabol, we’re big fans of 18F, the US Federal Government’s digital services agency. We love how they’ve found a way of operating nimbly within a truly byzantine context. In late 2015, 18F announced an interesting experiment: small cash payments for contributions to their open-source projects. They call it, “open source micro-purchasing.” In their own words:
We’ve long known at 18F that opening our source code from day one improves our ability to deliver…. We also want to see whether [offering up to $3,500] is a sustainable way to engage small businesses and non-traditional contractors in the government space.
It’s smart: federal employees at 18F are authorized by the government to directly buy services on their purchasing cards as long as the amount doesn’t exceed $3,500. The government generally lags behind the private-sector in innovation. With this experiment, that clearly isn’t the case.
It caused us to wonder, could we adapt the idea to early stage startups in the private sector and compensate with equity instead of cash?
Our experiment: Equity for Effort
We’re a young company with big ambitions. We haven’t yet taken any outside investment to hire all the wonderful folks from our community. However, we can issue equity to contractors for qualifying work. We’ve decided to test this approach for developing our first product, Action, an application for building and operating agile teams.
Designers and developers can choose to accept work we advertise on our public backlog. In exchange for signing a lightweight contracting agreement we’ll issue an options grant for equity for qualifying work.
We suspect, at a minimum, this experiment will make building our talent pipeline much easier.
If we’re successful, we hope it’s a model that others can use and improve upon.
How it works
We’ve intentionally kept the process light and simple to start. There are just four steps:
- Find a Project: Designers and developers browse the work available on Action’s public kanban board (note: you have to sign in with GitHub to see it): all the design tasks are listed under the list ‘Needs Design Spec’, all of the development tasks are under ‘Ready for Build.’
- Size It & Grab It: An individual or a team wanting to take on an item posts a comment sizing it as a number of points.
- Do It: Once we’ve acknowledged the sizing, they complete the work and submit it to us as a GitHub pull request.
- Collect Points: After the work has been reviewed and merged into the source tree, we update our public scoreboard and credit the creator/s with the agreed number of points + 10 bonus points (to bias toward keeping tasks small). Once an individual accrues more than 100 points, if they’re qualified (of age, legally able, etc.), we issue them options for equity in Parabol, Inc.
So how much equity are we talking about? We’re setting the initial conversion at 100 points for 10,000 options in Parabol from our options pool. With 10M shares outstanding, that’s presently 0.1% of the company. We expect most tasks to be sized at 5 points — about a week’s worth of work. 100 points should roughly be equivalent to seven weeks of effort.
The first time you submit work to be reviewed, we’ll ask you to sign an agreement to become a contractor to the company and verify your eligibility. Our agreement will always be open and public so you can decide if what we’re offering works for you. You can view the current agreement here.
Suggest Your Own Improvement
If you don’t see a mission you think is worthwhile, feel free to suggest one. All you have to do is open an issue on Action’s GitHub Issues page and make a suggestion for what you’d like to work on. If we agree, we’ll send you a contract and can get compensated when you complete the work.
How to get involved
Sound interesting? We’re glad! You can read all the details in Action’s contribution guide. If you’re ready to tackle a mission for us, browse Action’s Waffle.io board: design missions are listed under ‘Needs Design Spec’ while coding missions are listed as ‘Ready for Build’.
If you’d like to follow along to see how this experiment unfolds, each week we’ll be publishing key metrics and updates for how it’s working (or not working) in our Friday Ship series. Or, follow us on Medium.
We’d love to hear what you think — especially if you’re a designer, developer, or a lawyer. Either post a public response or reach out to us at [email protected].
This also might be a terrible idea
Just like 18F warned with their own experiment, this too might be a terrible idea (although, so far it’s looking promising). We believe there are a number of talented folks who are sitting on the sidelines not sure if we’d want them to contribute, or if making a contribution is worth their time. We’re asking as explicitly as we can.
We’re aware that other experiments involving cash or attribution for contribution have been made (such as Assembly) or are actively attempted (such as colony.io). We’re curious to learn if these curated communities are even necessary, or if using lightweight infrastructure on top of GitHub (as we have) will be sufficient.
Post-funding, we’re considering setting aside a small amount of cash to offer contributors their choice of converting accrued points to some amount of cash and equity. When this occurs, we’ll be able to offer more flexibility in the mix of compensation we can offer our contributors: folks betting on our long term success can take more equity while those who could use the cash can accept it as 1099 contractors.
At the very least, you can be sure we’ll publish what we learn!
