Should I take royalties or a stake in a startup in return for writing software for them?

This is my first visit here, so hi.

I have been asked to write some software for a startup which has an exciting plan. All options are open and in the first instance about 6 months of work is involved to get to a Phase 1 product. As a rule of thumb should I take the opportunity of a share in the company or keep my distance and take royalties. This is a risk share so a traditional fee based approach is not preferable. Also I feel I would want to keep the IP although I would be encouraged to release this for a share of the business.

Many thanks,

Sam

If the startup intends to raise funding at some point then your keeping the IP will be either a major roadblock or a show stopper. Food for thought.

Interestingly enough I am in the same situation right now. The outlook for the startup that am involved in is looking pretty good so I was able to reach what I thought was a good deal.

Their original offering was payments over 8 months plus a 10% preferred stock equity (after the first 2 years have gone by). I was able to get them to double their monthly payments in exchange for a 5% equity later down the road.

In my opinion you should try and do the same thing so that you are sure to be compensated for the work that you do and if things turn out well you will get some "royalties" later on in the startup's life.

P.S. This is my first post on here as well.