Posts Tagged ‘Sweat Equity’

There are signs that the way how the successful start-ups may be built in the future is changing.

First, the supply of venture capital is decreasing. And there are few issues related with this, but that has always been the case. Just see techcrunch.com and thefunded.com and you can make your own conclusions.

Second, bootstrapping a company is in many ways easier than ever. And even if you are not a Ruby on Rails expert yourself, you may nowadays find an implementation partner for your idea with the sweat equity model.

There are, of course, at least two different kinds of “sweat equity” variations. One model is that where consultants take a stake in your company, you sweat and do the work and the equity is split when the exit becomes feasible. This is not the one I mean, but the “hands-on” sweat equity. It again can be done in many different ways, for example so that your partners take care of the development cost or otherwise do concrete, actual and useful work for the company. 

This is not to say venture capital would be disappearing. As some of the investors told us in the Le Web event it may just be changing. As more and more services do get the first version out without venture capital, the investors can actually use the service before investing in the company. And as they said “don’t call us, we’ll call you” it might mean that IS the way how to get them interested. So it could also be these two things are not alternatives to each other but complementary to each other.


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