A graphic designer working for equity

With a friend we are doing a spare-time startup; that is, developing stuff on our spare time trying to make something that makes money. We have several products to launch soon but neither of us is a graphic designer or have the money to pay for one. Would it be realistic to get a graphic designer to work, like us, for equity?

I'm hesitant to even ask a graphic designer for that because I know they constantly get drowned in work opportunities for future uncertain compensations.

Also, how much do you think is fair to give? We are two coders that been working for over a year. I think we'll always have much more work than the designer and I'm not willing to part for more than 8%, but maybe then it's even more unrealistic.

If you idea is any good, and the graphic designer has any brains, he should jump at the chance. Which is to say, if you pay equity for something as readily available as graphics designer for a shorter project, then you're way overpaying.

And the irony is, the graphics designer may not be impressed at all, for exactly the reason you give, they often get "work now, maybe we'll pay later" types of proposals.

IMHO you should not do this. Some reasons:

• There are legal fees to consider, you would need to issue new shares or issue a convertible note, and possibly to draft a new shareholders agreement.
• Once the graphics designer gentleman is a shareholder, he may feel inclined to involve himself in business decisions. You don't know if he's good at that part.

How about barter trade instead? I can't speak for your legal situation in your country of residence, but in most places barter trade is perfectly legal, just rarely used. Give him, say, 40 hours of work by you in return for the same from him. Good web designers often need a programmer to customize some CMS/shopping cart/whatever system.

Both parties should agree to providing reasonable estimates for each task up front, and ongoing status information about their progress. Since you're equal partners in this, it shouldn't be hard to reach an understanding on the terms.

NB: The above is assuming that you're talking about a shorter engagement with the graphics designer. If you're considering having him work continuously on your projects without salary, then he's a cofounder and should of course have equity.

This is a bad deal both ways - for you it's giving away part of the ownership of the business for a small amount of work and for the graphic designer it another "work now maybe get paid in the future depending on circumstances that are out of your control" deal.

I suggest you do the graphic design, try to make a simple usable and not-too-ugly design (or maybe base your design on a template you buy), launch with that design - if your product is worth anything you will be able to still get some customers with the ugly design, use that money to pay a designer.

Unless you have a serious amount of money you don't have the luxury to release only when your product is perfect, learn to compromise and to leave things to version 2.

Not sure if helpful, but you could always check out sites like: http://www.designenlassen.de/, where you can post private projects to have stuff developed/designed and can pick from participating graphic artists designs. Gives you much more choice than settling on a single designer.

Of course you will need to pay in $$$ not equity, but that's not the worst thing either. Taking someone on board with equity is easy, getting someones equity back, if you realize after a while it's not a good fit is a whole different story.

As with all compensation it's useful to start by asking "What would this designer be paid if you had the cash?"

Then you move to "How much is this stock worth to us/her?" If you can agree on the value of the stock today (against anyone's guess to future value and the risk of that value), the conversion rate is simple.

If you can't agree, it's doubtful any arrangement will make all parties happy, beacuse you don't agree on the value of the things being traded (her time, your stock).

How much design work do you have? How crucial is it to your business? If it is on and off than try freelance designers. It is easier to scrape some cash for a particular assignment, that will meet at least one of your goals, than get into an open-ended commitment with a professional, who's professional work and work ethics you are not familiar with.

Check out sites like elance.com and similar.

Good luck.

It's doable but only if it's their second job and you only need a little work done. Only a founder will work solely for equity without another job.