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.
There are several avenues for startups to connect with designers. Platforms are dedicated exclusively for design professionals - enviro, theme forest, oDesk to name a few. Depending on your project & size you get work done for a reasonable price.
As long as your are cash strapped, I would reserve equity for employees. Equity serves as a great incentive to grow your company in the years to come.
With that said, I know of tech/dev companies that partner with startups to work for equity until they can be paid at a future time