Build & operate trades budget for equity. When it's smart, when it's a trap, and the clauses to negotiate before signing.
We get the question from both directions. Founders without the budget who offer equity. Founders with the budget who wonder whether they should offer some anyway, to align interests. We run this model. What follows therefore includes the reasons not to take it — including with us.
What you're really trading.
You aren't trading budget for shares. You're trading a one-time expense for permanent dilution. A $40,000 build is a cost that leaves once. Ten percent of your company is ten percent of everything that comes after — the sale in seven years included.
If the company fails, you did well. If it succeeds, it's the most expensive financing you'll ever take. That isn't an argument against: it's the argument to put on the table before discussing the percentage.
When it's smart.
You have the market, not the budget: clients waiting, a distribution channel, rare sector expertise, and no cash. Equity fills exactly that hole.
The studio brings more than hours. If all it supplies is code, you're paying a contractor in shares, which is absurd. If it brings structure, network, credibility with investors or regulatory expertise, the trade becomes defensible. And you want a partner who stays: a contractor delivers and leaves, a partner on the cap table has an interest in the product working in year three.
When it's a trap.
The studio wants a majority. A founder who is a minority in their own company won't raise: no serious investor funds a company where the person carrying the project doesn't have control. A studio asking for a majority closes the next doors for you.
The shares vest immediately. The studio takes 15% at signature, delivers for three months, disappears — and keeps 15% forever.
No deliverable, no shares. Vesting tied to delivery, or nothing.●
There's no exit clause: what happens if you want to buy the shares back in year two? If you can't answer, don't sign. And the studio holds equity in fifteen companies: it's running a portfolio, where two successes fund thirteen abandonments. You can be one of the thirteen and only find out when the replies stop coming. Ask how many simultaneous commitments it carries — a vague answer is an answer.
Five clauses to negotiate.
Progressive vesting tied to deliverables, with forfeiture on abandonment. A participation cap — beyond 15 to 20%, your ability to raise narrows sharply. A buyback right on a formula known in advance, exercisable from a fixed date.
A quantified capacity commitment: how many hours a month, over what period. “Our team will be available” commits to nothing. And ownership of the code from day one, independent of the equity relationship — the code has to be yours even if the partnership ends.
Our position.
We only offer this model if you already operate the market, if the product fits our thesis, and if you stay majority. Always. And a rule we impose on ourselves: studio-type commitments are capped at 30% of our capacity. The other 70% is reserved for client delivery.
The reason is simple: a studio that spends most of its capacity on its own bets ends up treating clients as the adjustment variable. The cap exists so that can't happen.
The question to ask any studio.
“How many equity commitments are you carrying today, and how many hours a month do you have left?” The quality of the answer will tell you more than the entire about page.