Paying for Services with Equity, instead of cash: Pros and Cons

Short of Cash, Start-Ups Opt to Pay for Professional Services by Offering Stakes to Website Designers, Marketers, Law Firms. Below the Pros and Cons.

Pros

  • The service provider has a vested interest in your success.
  • You can spend your cash on developing or improving your product.
  • You may be able to grow faster than if you had to wait until you raised outside capital.

Cons

  • The service provider may give its paying clients greater priority.
  • You dilute your ownership stake, which can hurt your motivation to succeed.
  • Professional investors may be turned off if you give away too much of your business.

Source / The Wall Street Journal

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