Equity Partnerships For Web Designers

Feb 05, 2013

I would be willing to bet that every web designer or developer has been approached at one time or another to do work on a website in exchange for an equity percentage of the company.  You see this a lot on ad listings sites: people pitching their great, million dollar to prospective web designers in hopes of enticing them in a once in a lifetime, business partnership which will be the next Facebook or Twitter.  Not so surprisingly though, very few (if any) developers worth their salt entertain these offers, and there's a few reasons why.

Million dollar ideas are a dime a dozen.  GoDaddy ran a commercial during the Super Bowl which pointed this out in a comical way.  Your great idea which you are certain will make a lot of money and make everyone in your life happy, has most likely been thought of by someone else.  That's ok though, people thought of Facebook before Mark Zuckerberg did, but for some reason he's the one that made it work.  This leads to the other issue with equity partnership proposals.

Web designers talk to owners of start-up companies all the time, and we work with many as well.  We hear the great ideas, and in some cases the ideas are great.  We feel the passion in the client's voice in regards to how perfectly planned out everything is - how every corner has been covered, and we hear their excitement as visions of inflating six and seven figure bank account balances scroll past their eyes like a stock ticker.  Then the work begins and the vision becomes complete.  The website finally gets launched and the client sits back and waits for the money to start rolling in.

As a web developer who may have agreed to an equity deal with this client, I will be waiting for my first cut of 20% to come in.  It most likely was a good idea and I probably did a halfway decent job on the site, although chances are if I actually agreed to do this, I didn't have much experience at all with professional web development.  But that's neither here nor there.  Hopefully I would have signed a contract, but anyone who signs a contract most likely understands that it's about as valuable as the paper it's printed upon unless you pay an attorney to look it over, amend stipulations in your favor, and then have the client re-do it.  This almost never is an option.  If you, as the developer, requested this, the client would almost certainly find someone else.  But let's say it was all done legit with a real contract and attorneys for both parties went over it with a fine toothed comb, leaving me as the web developer waiting on my first check of 20%.

A new website is like the elusive Planet X - it's out there but nobody can see it.  This is really the crux of the equity partnership problem.  Getting a new website noticed takes time and money.  The time component can only be overcome if you happen to get an advertisement on television in front of millions of viewers, or if you get a write-up on one of the major news networks, or maybe if you're Tweeted multiple times by Lady Gaga or Beyonce with their endorsement.  If you can't get this type of instant marketing, then it will take time.  Time and money - in most cases, lots of money.  

So as a website developer, when approached by a client to do an equity split in exchange for thousands of dollars worth of work to get a website launched, the first thing that pops into my mind is, "if he/she can't afford to pay me $5000 to develop their website, how are they going to afford to spend three times that amount, or even more, to get the website bringing in enough visitors and producing enough business to actually be able to pay me back for the time I spent, in a somewhat timely manner?  And, will that one year contract even be close to enough time to pay me back given these circumstances?"

The clients that it would be worth while to do an equity split arrangement with, where I as a developer will actually make my money back in a timely manner, and then some, don't need to enter these arrangements and more importantly, wouldn't want to enter into one of these arrangements, because it would be cheaper just to pay up front than give a percentage on their million dollar idea.

NTR Imagescapes is a Chicago web design and development company that offers premium yet affordable web services to individuals, small and medium sized businesses.

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