Working for Equity

Posted 11 years, 1 week ago.

Imagine you want to build some form of house. You don’t have any money, really, but that shouldn’t stop you. There are heaps of people making millions in the housing market according to your sources, so this will be easy money. You draw up your plans, buy the plot of land, and call a builder.

“Look, I can’t pay you any money, but how about I give you 20% of the value of the house when I sell it?”

In the past couple of weeks, a couple of guys looking to make money in the iOS game market have offered me equity in their business/apps in exchange for working on game projects that they come up with. For some reason they can’t seem to grasp that no matter what the percentage is, equity is the worst form of payment you can give. It’s essentially the promise of future riches if the product is sold, or if it takes off.

And therein lies the catch.

There is a very small percentage of apps or companies that get sold off to the likes of Google, Facebook or Apple. The properties that do are typically the best in their field, or aligned very closely with the buying company’s existing product set. Google bought Sparrow because it was the best in it’s field. Facebook bought Instagram because it was (and still is) the de facto photo-sharing social network on the internet today. Vine was bought by Twitter before it was even launched because they were doing for video what Twitter does for blogging (and they wanted something to compete with Instagram).

There’s also a small percentage of apps that make any real money from the app store. Most independent apps lose money. I know for a fact that the amount of time and effort I’ve spent on the apps I’ve built exceeds by far the amount I’ve ever made from them. To date, Progressions has made AU$3,404.11. I make more than that in a month doing client jobs. In total, I’ve spent, accumulated, a total of around 4 months or so designing, coding, marketing, writing, supporting and promoting the app.

I don’t mean to sound bleak, but it’s pretty unlikely that your independent app is going to make any serious money, whether it be from selling out to a larger company or by becoming huge in the app store. And if you do, it’s not going to be easy. It’s going to be the hardest thing you’ve ever done, partly because you’ll have no idea if it’ll pay off in the end or not, but also because you’ll need give it everything you have.

There are two motivators for building apps, as far as I can see. The first is money, and it’s the basis of society: I give you my services and skills in development in exchange for money which I can in turn use to purchase food, clothing, shelter and entertainment. The other is love. I’ve done one app for someone for free, Multiplex for iOS, and it was entirely because I love the work that Gordon does, and because I wanted to give him something in exchange for the eight years of comics he’s given to me and the internet at large. My self-initiated projects, the afore-mentioned Progressions, and an upcoming project GIFwrapped, were born out of my need for them (yes, I need an app for sharing animated GIFs from my phone).

The offer of equity has neither of these things. It you have to be swayed with it, you likely don’t love the project (and to be frankly honest, you’ll only truly love one or two in your career). It also doesn’t guarantee any money: unless you can tell the future (and if you can, you’re probably in the wrong line of work), you have no way of knowing whether you’ll see any of the value you put into a project. Maybe you will become a billionaire from creating a simple app. You probably won’t.

All this might seem negative, but it’s really not. The greatest motivator you have is love. If you’re going to work on a project, do it because you love what you’re doing. If you don’t love it, do it because you’ll get a paycheque, whether from your employer or from your client. If you can manage to get a project where you both love it and get paid, you’ve hit the jackpot.

Don’t ever work solely for equity. It’s an empty promise, and you’ll only regret it in the end.