Reasons to trade Code for Equity instead of raising a traditional Pre-Seed or Seed Round.

4. It will cost you a lot less equity.

If you are lucky enough to get someone to back you based on an idea or your team’s ability to deliver on a concept, then they are taking a substantial risk. In return for that risk, the investor will ask for a large amount of equity.

On the other hand, if you sign up for code for equity, the investor is not giving you money, but rather a technology so it reduced their risk somewhat. That translates to lower equity given away.

3. An idea alone is often not enough.

If you are looking to raise money on an idea or the strength of your team, it is possible but very difficult. Investors want to see real traction, a working product, a proof of concept. Something they can touch and feel that supports your pitch. Research and info-graphics sometimes may cut it, but more often than not is not enough to get investors to pull the trigger.

2. The cost of capital at your next round will be much lower.

Once you have a delivered MVP, a tangible working prototype of your product, then you have reduced a great amount of risk from investing in your business.

A working product, a proven concept and ideally validation of your market will get you to the next round of funding faster and for a considerably lower amount of equity than you would give up without a ‘proof of concept’ or ‘market validation’.

1. You will have a technology partner invested in your success.

It is expensive to set up an in-house team, especially at the very early stage. Most start-ups end up outsourcing to onshore or offshore firms. There is a multitude of things that can go wrong with outsourcing your product.

When you agree to code for equity investment, the investor provided you with the tech or code, not cash. The beauty of this model is they are not paid for their services. Their success lies in your success. There is no greater motivator for quality production than a positive return on investment!

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