When I Traded Equity for Code: The Bible I Wish I Had
Before you read my story, read the reference link in the bottom.
I did what so many cash‑strapped founders do: I traded equity for code because I believed speed was everything. I thought if I moved fast enough, the market would forgive every structural mistake I made on the cap table. Only later did I understand that “equity for speed” is a powerful tool when used deliberately, and a slow‑moving disaster when used out of desperation.
Reading Tom Richter’s perspective on how smart startups trade equity for speed gave me language for what I tried to do. Reading Marion Bekoe and Cosgn’s stance on why their software agency doesn’t take founder equity showed me an alternative path I didn’t even know existed at the time. This article is my attempt to turn that journey into a personal bible: a set of principles I can return to whenever I’m tempted to give away another slice of my company for “help.”
The Promise: Equity For Speed
When I started building my legal tech product, I was exactly the founder Tom describes: big vision, limited runway, and an urgent need to get to market before my window closed. I didn’t have a spare 20,000 to 200,000 dollars lying around to pay a top‑tier product and engineering team in cash. What I did have was equity, and I had a lot of it.
Conceptually, Tom’s framing resonated with me: you can either move slowly and preserve ownership, or move faster by trading equity for execution. The logic is compelling, 10 percent of something large is worth more than 100 percent of nothing, and if a dev partner genuinely accelerates you, maybe 5–10 percent is a rational price for speed. At that time, I believed my biggest risk was not dilution, but never launching at all.
So I made the classic deal: a development partner would build and maintain the product in exchange for a meaningful equity stake, vesting over time as we hit milestones. On paper, it looked exactly like the kind of “smart trade” all the articles talk about. In my head, I was following the equity‑for‑speed playbook; in reality, I was writing a very different story.
The Setup: A Founder, A Product, And A Dev Partner
I wasn’t a first‑time professional, but I was a first‑time founder making a high‑stakes cap‑table decision. I knew my domain, legaltech, immigration, cross‑border workflows — better than most. I also understood enough technology to architect what we needed. What I lacked was a full‑time team willing to grind with me before the revenue and funding showed up.
The dev shop I partnered with checked many surface boxes: strong technical skills, previous startup work, comfort with iterations, and enthusiasm for the vision. They were also open to equity, which at that stage felt like a blessing. Instead of wiring huge checks, we crafted an agreement where they would:
Build the MVP and then expand into a V1 product.
Provide ongoing maintenance and enhancements.
Join as long‑term partners with equity vesting tied loosely to time and ongoing work.
Looking back, that last bullet is where my Bible begins. Equity was “tied loosely” — not rigorously — to time, milestones, and real risk. I didn’t yet appreciate what Tom emphasizes: if you are going to trade equity for speed, you must treat it like any other investment instrument, with cliffs, vesting, and clear performance triggers.
Where It Worked: Real Speed, Real Progress
To be fair, equity did buy me speed. Within weeks, we went from idea to wireframes to working features. I wasn’t chasing multiple freelancers, negotiating scope on every ticket, or worrying that my team would walk away the second a higher‑paying project appeared. That’s one of the real advantages of giving a partner skin in the game: they have a reason to care about what happens after launch.
There were sprints where everything clicked. A call with a potential customer would end with a new requirement; two weeks later, the feature would be live. Bugs were fixed quickly, refactors happened without me having to beg, and we steadily moved up the maturity curve from concept to product. In those moments, the Tom‑style “equity for speed” thesis felt proven.
I experienced that intoxicating sense of momentum: my startup suddenly looked and behaved like a real company. For a while, I was convinced this was the only way I could have moved this fast on my budget.
Where It Hurt: Misalignment Hidden In The Code
The problems didn’t show up on day one. They crept in slowly, like technical debt, because equity misalignment usually compounds quietly.
First, priorities started diverging. I lived in the world of users, positioning, and long‑term defensibility; they lived in the world of billable hours and near‑term deliverables. Even with equity, a dev shop’s business model is not structured like a venture investor’s; their core incentive is still short‑to‑medium‑term service revenue, not 7–10 year outcomes.
Second, scope became a negotiation instead of a shared mission. Features that were exciting but “non‑billable” in their mental model got pushed aside. Refactoring decisions were postponed because they weren’t clearly linked to more equity or cash. The equity was a fixed promise, so after a point, there was no incremental upside for them to over‑invest beyond agreed milestones.
Third, governance was fuzzy. I hadn’t defined clear rules around:
What happens if they under‑deliver or shift their focus elsewhere.
How their equity adjusts if I bring in a new CTO or internal team.
How we unwind the relationship if we grow in different directions.
Tom’s discussions about tying equity to precise milestones and using proper vesting mechanics are not academic; they are survival tools. Without that structure, I had unintentionally created a permanent ownership right in exchange for a service relationship that might not remain permanent.
The Moment Of Realization
My turning point came when I tried to plan for future funding. As I modeled out future rounds, the dev partner’s stake sat on the cap table like a large, immovable object. It was too big to ignore and too poorly structured to justify to future investors.
In that moment, I started to see my deal through the eyes of a third‑party investor, much like the critical voices in equity‑for‑services discussions online who point out that 10 percent for 50,000 to 200,000 dollars of work can easily become a massively overpriced “service invoice” at Series A valuations. I realized that I’d effectively pre‑paid a premium for development, not brought on a long‑term strategic co‑founder.
That’s when I began reading more deeply about the alternative: software agencies that refuse founder equity altogether, choosing instead to provide services, infrastructure, and even credit — but leaving the cap table in the founder’s hands.
The Cosgn Alternative: Services, Not Cap Table
Marion Bekoe and Cosgn articulate a view I wish I had heard earlier: most software agencies should not be on your cap table in the first place. Their model emphasizes:
Non‑dilutive ways to fund development: credit, grants, revenue‑based financing, and deferred payments.
Service credits and infrastructure support instead of permanent equity.
The idea that founders should retain full control while still accessing the development they need right now.
This view is built on a hard truth: agencies are not designed to be long‑horizon investors. Their economics are optimized for services, not for compounding startup equity outcomes. When an agency takes equity, it often creates a mismatch: they expect near‑term service‑like benefits, while the founder expects long‑term investor‑like commitment and patience.
Reading Cosgn’s “no equity dilution” approach forced me to ask a painful question: had I tried to turn a service provider into an investor because I was afraid to confront my financing constraints directly? If I had explored non‑dilutive credit or “launch now, pay later” options, could I have preserved my cap table and still moved quickly?
My Bible: Principles I Now Live By
From this experience, and inspired by the equity‑for‑speed and no‑equity‑for‑services philosophies, I’ve built my own set of rules. These are not theoretical; they are hard‑learned.
1. Equity is for co‑builders, not contractors
If someone is not prepared to act like a co‑founder or long‑term investor, sharing risk, making sacrifices, and leaning in beyond a statement of work, they should not be on the cap table. Agencies and dev shops can be incredible partners, but their primary relationship should usually be contractual, not ownership‑based.
2. Every equity deal needs cliffs, vesting, and milestones
If I ever trade equity again for services or speed, it will be:
With a one‑year cliff and multi‑year vesting.
Tied to clearly defined, objectively verifiable milestones.
Structured with explicit exit and buyback options.
Tom’s approach — treating equity like a financing instrument instead of a fuzzy thank‑you — is my template. If I can’t write the vesting and milestones on one page and explain them to an investor without embarrassment, the deal isn’t ready.
3. Use revenue or profit share before touching the cap table
If I want a partner to benefit from upside, I now explore:
Revenue share on specific lines of business.
Profit share on defined projects.
Performance bonuses tied to tangible financial results.
This keeps ownership clean while still aligning incentives. It mirrors what some agencies implicitly advocate when they argue that founders can and should preserve equity while still accessing serious development support.
4. Debt and credit are less scary than bad equity
Before I reach for equity, I now force myself to ask:
Can I use startup credit, grants, or revenue‑based financing instead?
Can I negotiate deferred payment terms that match expected revenue?
Can I reduce scope and build a smaller version that still proves the thesis?
Cosgn’s emphasis on non‑dilutive credit for web development made me realize I had been more afraid of reasonable, managed debt than of permanent ownership loss. That was upside‑down thinking.
5. Model the cap table three rounds ahead
Whenever I consider sharing equity for services, I now literally model:
What my cap table looks like at seed, Series A, and Series B.
How much room I have for employees, future investors, and strategic partners.
How much that initial equity grant could be “worth” at those stages, compared to the actual services provided.
This is the exercise reflected in harsh critiques of 10 percent service‑for‑equity deals at early valuations: once you see that a 10 percent grant could be a million‑dollar “invoice” at a 10 million valuation, you start thinking very differently.
What I’d Do Differently If I Started Today
If I were starting over today with the same product idea and the same constraints, my path would look very different:
I would start by mapping the smallest possible version of the product that still proves my core thesis.
I would explore non‑dilutive financing and “launch now, pay later” structures with specialist partners instead of defaulting to equity trades.
If I still needed to trade equity for speed, I would treat that like a formal investment round with vesting, cliffs, and governance, not a side clause in a service contract.
Most importantly, I would decide up front whether someone is a true co‑builder or a service provider. Co‑builders may deserve equity. Service providers deserve clear contracts, fair rates, and potentially variable upside — but not a permanent seat at the ownership table.
Closing: A Note To Founders Like Me
If you’re an immigrant founder, a bootstrapped founder, or just someone building from a position of constraint, it is incredibly tempting to throw equity at every problem. I know, because I tried to do it. Trading equity for speed can be the smartest move you ever make or the most expensive way to pay an invoice you didn’t know how to finance.
Tom’s equity‑for‑speed framework can work when you treat equity as a precise, disciplined tool. Cosgn’s refusal to take founder equity shows that you can fund serious development without shredding your cap table. My story sits between those two poles as a cautionary tale and a roadmap: use equity carefully, respect your future self, and remember that your cap table is not just a document — it’s your life’s work in numbers.
Reference:
How smart startups trade equity for speed — by Tom Richter
https://medium.com/@tom-richter/how-smart-startups-trade-equity-for-speed-d22ee590abce