Equity vs Consultancy: How We Structure Startup Partnerships

Should you pay for development or trade equity? After dozens of partnerships, here's how we think about it - and what works best in different situations.

The Three Models

We work with founders in three ways:

1. Pure Equity

We work for ownership only. No cash changes hands.

When it works::

• Pre-funding or bootstrapped startups with limited cash
• Founders with strong domain expertise but no technical co-founder
• Ideas we're genuinely excited about and willing to bet on

What we look for::

• Significant ownership (we're taking real risk)
• Vesting schedules aligned with project milestones
• Clear decision-making authority on technical matters

2. Pure Consultancy

Standard paid engagement with day rates or project fees.

When it works::

• Funded startups with budget but time pressure
• Specific, well-defined projects
• Teams that already have technical leadership

What we avoid::

• "Build our MVP for £20k" requests (it never is just £20k)
• Projects without clear success criteria
• Founders who see us as vendors rather than partners

3. Hybrid

Reduced rates plus equity upside. Our most common arrangement.

When it works::

• Early-stage funded startups
• Projects where we can add strategic value beyond code
• Long-term partnerships (2+ years)

Typical structure::

• 50-70% of market rate cash
• 1-5% equity depending on involvement and stage
• Milestone-based vesting

How We Evaluate Opportunities

Not every startup is a good fit. Here's what we consider:

The Founder

• Domain expertise (do they deeply understand the problem?)
• Coachability (will they listen to technical advice?)
• Commitment (is this their full-time focus?)

The Market

• Clear, quantifiable problem
• Willingness to pay
• Not dominated by incumbents with unlimited resources

The Product

• Technical feasibility with current tech
• Reasonable scope for initial version
• Potential for our expertise to add unique value

The Terms

• Fair equity for the risk we're taking
• Enough runway to reach meaningful milestones
• Clear exit timeline (even if 5+ years)

Real Numbers

To be transparent about what these structures look like:

Pure Equity Example::

• Pre-seed startup, zero funding
• 12 months of development
• 8% equity, 4-year vesting
• Outcome: Acquired for £4M, our share: £320k

Hybrid Example::

• Seed-funded startup, £500k raised
• 18 months of development
• £3k/month + 3% equity
• Cash: £54k, Equity value: £300k at Series A valuation

Consultancy Example::

• Series A startup, well-funded
• 6-month project
• £150k project fee
• No equity (their choice - they wanted to move fast)

Common Mistakes Founders Make

Overvaluing Early Equity

Your company isn't worth much yet. Don't be precious about giving up 5-10% to people who will materially increase your chances of success.

Undervaluing Good Help

The difference between mediocre and excellent technical execution is often the difference between failure and a £50M exit. Invest accordingly.

Unclear Agreements

Get everything in writing. Vesting schedules, cliff periods, intellectual property, decision rights. Ambiguity kills partnerships.

Our Decision Framework

When evaluating any opportunity, we ask:

1. Would we be proud of this work in 5 years?
2. Do we genuinely believe this can succeed?
3. Is the founder someone we want to work with for years?
4. Is the structure fair for everyone involved?

If any answer is no, we pass. There are plenty of good opportunities - we don't need to take bad ones.

Thinking about how to structure a partnership? Let's have a conversation.