Sounds like you need to decide what you need from your buddy. Do you see him as a way to get some high quality development done in a cash-poor situation, or do

Sounds like you need to decide what you need from your buddy. Do you see him as a way to get some high quality development done in a cash-poor situation, or do you see him as someone who would contribute in every possible way to the success of your startup? If it's the first, then you're using equity as a way of paying him. You're essentially saying: "Your work would normally be worth $20,000 to me. However, I don't have the money. So I'd like to pay you in shares that have a chance at being worth a great deal more than $20,000 down the line." In the second case, you're saying "I need a partner, especially one with a technical background. I see you as having the ability to make this venture a success, in ways I can't even anticipate right now. This is a very early stage startup, with all kinds of risk. This thing will consume your life for at least a few years, so you'd be coming in as a cofounder". It can be pretty difficult to get well employed, well paid programmers to take either deal you're offering, but I'd say the second is probably the best bet in terms of getting him to agree to come on board. Mainly because working equity usually means you end up working for nothing. However, I would also caution you against making someone a cofounder simply because you need his tech skills and can't afford to pay him. He's a buddy, that's great. But you need to have faith in this guy's abilities as a cofounder.