I am a developer and own a web/mobile development agency. I had some success with startup as the technical co-founder. I get pitched few times a week by people saying they have a great startup idea, and if they develop it they will give me some equity. How do I tell them if you cannot manage few thousand dollars for developing a product they shouldn't be entrepreneuring and go get a real job - without sounding like a jerk. I am okay if people ask me if I can develop it for a lower fee and some equity. I really get agitated when people ask for free work. How do I convice them they should pay. Most people who ask for free work can afford to pay.
Asking other people to give us their products and labor for free ISN'T normal. So when someone asks us to give up our time or property for their benefit, we really must push back – even if only with a raised eyebrow.
Sure, in charity cases, we might be generous. And there might be a few startups where the risk / reward analysis justifies sweating out a contribution for the sake of equity alone. But wantrepreneurs are a dime a dozen. Something like 90% of them fail. So the bar needs to be high.
You understand this already. But do the panhandler CEO a favor and explain the situation to him as well.
Just because someone fancies himself an entrepreneur doesn't mean his daydreams are a credit card with an infinite limit. Would he tell his landlord to accept equity instead of last month's rent? Would he wave away the waiter at the restaurant, saying, "Congratulations! You own 0.1% of my latest startup fantasy"? Would he approach a used car salesman and volunteer to pay with stock in a mirage?
No self-styled entrepreneur would dare do any of those things. He'd feel sheepish to the point of paralysis. Yet, illogically, many wantrapreneurs feel that it's somehow appropriate not just to ask but to EXPECT web designers, app developers, and the like to give up their own projects and work for them for free – i.e. for a 90% chance of the equity being worthless.
Once you sit the person down and explain these facts, they'll usually understand.
People don't value what they don't pay for or work for or make sacrifices for. If the entrepreneur is eating out at restaurants, watching TV in the evening, or taking Saturday off, then he has no right to expect you to go unpaid while he's luxuriating in indolence. Let him make his own sandwiches for a month and divert his free time into an evening or weekend job and pay you that way. Then he'll understand what it means to ask someone else to work for nothing.
If the entrepreneur really can't afford to pay you, then BARTER is the fair way to proceed. Not with equity. His startup idea is probably a mirage; and, statistically speaking, is likely to flop. Find something he owns or can provide that you can benefit from. Make a swap. Or if you're just too busy to work on another unpaid project, tell him.