Equity vs. Cash: What's the Right Way to Pay Your Technical Co-Founder?
TL;DR: Equity or cash each has upsides and downsides. Equity means you're in it together for the long haul, but it's risky for everyone involved. Cash gets you expertise now, but your technical partner might not care as much about the big picture.
You've got the AI idea. You've mapped out the product roadmap. Now you need someone who can actually build this thing. But here's the million-dollar question: how do you pay your technical co-founder?
The Equity Route: All In Together
Why it works:
- They're literally invested – When your co-founder owns a piece of the company, they're thinking about what happens three years from now, not just this month's sprint
- Your cash lasts longer – Let's be real, early-stage startup money disappears fast. Every dollar you don't spend on salaries is a dollar you can spend on customers or servers
- They stick around – Someone who's given up salary for equity isn't bouncing after six months when another company offers them more money
- You get true believers – The people willing to bet their time on your idea are usually the ones who actually believe in what you're building
Where it gets tricky:
- They're taking a huge risk – They could spend 18 months building something with you and end up with nothing if things don't work out
- Different time horizons – You might need features shipped this quarter, while they're focused on architecture that'll pay off in two years
- Future funding gets messy – Give away too much equity early, and investors will wonder what's left for them
- Experience gap – Sometimes the people who can afford to work for equity aren't the people with 10 years of experience building AI systems
The Cash Option: Paying for Skills
What you get:
- Proven talent – You can actually afford someone who's shipped products before, not someone learning on your dime
- No ambiguity – Here's what you build, here's when it's due, here's what you get paid
- Speed – You're not waiting for them to "get invested"—they're there to do a job and they know how to do it
- Easy exit – If it's not working, you can end the relationship without months of negotiation about who owns what
The catch:
- They're employees, not partners – At 5 PM, they go home and think about their next job, not your user feedback
- Money burns fast – Good engineers cost real money, and that's money you probably need for other things
- They'll leave for the right offer – A bigger paycheck from Google? See ya later
- No skin in the game – When the company sells for $50 million, they don't get that life-changing moment you and your investors get
The Mix: Why Not Both?
Most successful founder stories aren't pure equity or pure cash—they're somewhere in the middle. Enough cash to cover their bills, plus enough equity that they still get excited about your user numbers.
How We Handle It
We do both.
Here's what we tell ourselves: the money setup has to match the goals. When we take equity, we're building alongside you. We're sweating the metrics, celebrating the wins, figuring out the hard problems together at 2 AM.
When we're on cash, we're still building like we own the place. We just set up milestones, regular check-ins, and clear success metrics so everyone knows what "winning" looks like.
The right choice comes down to where you are right now, what you can afford, and what kind of partner you need most. The real key is being straight with each other about expectations, risks, and what happens when (or if) things work out.
Whether it's equity, cash, or both—you're trying to build something people actually want to use. Everything else is just details.
