l’ve just been approached by someone heading a startup offering company shares in exchange for part-time unpaid work. He’s mentioned cash won’t be paid until they’ve acquired a seed round of investment. Are these offers usually a scam in the startup world? Or is this typically normal? Thanks
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Everything must be in a contract. Even if it’s your best friend.
I get a feeling thay the founder or whoever approached you, sees this as some kind of free work as shares are offered to VALUABLE and long-term employees.
Not something you just give away for part time work every now and then… unless you don’t believe they could be worth something one day.
I would pass.
Sweat equity is quite common for very early stage startups. As others have said you’ll need to asses the other founders and the idea, and really need to believe in it.
I would never do that personally. Shares for virtually every startup ever should be considered worthless or like a lottery ticket.
This tells me they have no money or no access to money and want free labor.
This is called “sweat equity” and tends to be normal’ish though typically for co-founders.
Not always, but here are some signs to look for:
- Are they experienced in raising capital? Have they had success in past ventures? Or first rodeo?
- Have they offered you any paperwork that explicitly outlines the agreement? ex cash for hours
- What research have you done on your part with the solution in the market?
- Have they pitched to you how and why this will be a success?
You are an investor. You will spend more time on the project than them.
Are the founders working full time? Is this a side hustle for them or are they all in? Do you believe in the team and the vision? If you decide to work a material amount of time for them for free I would push for cofounder status.