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.

The answer to this question lies in the details of how far along you are in the launch process. Early in my career I chose to outsource the design of the branding elements and website UI/UX to an outside firm only to reverse course and take the company (successfully) in another direction rendering the original designs almost completely obsolete. We paid in cash and when we decided to change things I was forced to design the website myself. Especially in the early stages it may make sense to give the person you are working with equity as they may need to make several revisions as your product changes with the preference of your customers. Deciding to give someone equity changes your relationship with the freelancer and what you are looking for in them and from them. When paying someone you are solely focused on the quality of the design. When distributing equity you need to ask yourself "Is this someone that I feel comfortable going into business with?" as the person will own a percentage of your company you must feel comfortable with them taking a more active role in your business as you will be relying on them for some time to come.

Hope this helps.

Answered 5 years ago

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