> 5% is an enormous amount of equity to grant for anything. No, it isn't. At a company that has raised capital or generates revenue, 5% might be enormous, or i

> 5% is an enormous amount of equity to grant for anything. No, it isn't. At a company that has raised capital or generates revenue, 5% might be enormous, or it might not be. It all depends on the company's valuation. The fundamental problem many early-stage startups run in to is that they haven't raised capital, don't have revenue and they try to use equity as an alternative to monetary compensation. In these situations, "sweat equity" is almost always a poor alternative because the math rarely makes sense for the recipient. For instance, if you're an experienced developer who can make $125,000/year and a friend wants you to become a co-founder of his business, forgoing salary until some future date or event, how much equity in a business worth $0 today do you need to make up for your salary? It's a trick question, and the answer is not 5%. Equity can be a very complex matter, but it's also very simple when someone suggests that it be used as a substitute for cash. If somebody wants to pay you for your services using equity, forget percentages. Determine what it's reasonably worth in dollars, if anything, today. If you are willing to accept less than the dollar value of your services, you're being generous to the company, not the other way around.