We just launched our startup with a designer helping us pro bono to spruce up the design of it. He's asking for compensation now (which is fair) and is willing to trade in his service for equity. Just wondering if it's better to pay than to trade equity for the service.
I've offered deferred compensation, because often the issue isn't whether you can pay cash *ever*, it's a matter of whether you can pay cash *now*.
The way to structure that is to offer cash payments due at a time in the future (like every month, quarter) that can be converted to stock if they aren't paid out.
The reason I prefer this is because if cash is available, I prefer to pay it in any amount, even if if reduces the stock payout only a bit.