Sweat equity is a term used when individuals contribute their time, effort, and expertise in exchange for future payment, in terms of shares in the venture or a realization of those shares as payment.

We calculated sweat by determining the percentage of a service fee in relation to the value of a business venture plus an additional risk margin. For example, a $10,000 fee in a $1 million venture equals 1% equity plus risk margin.

Equity can convert to payment a number of ways, as predetermined by the founder. Some options include:

Convert to Equity at the Next Financing Round:
The Expert's project fee converts into equity (shares) at the next financing round.

Pay Out at Business Sale:
In the event of a business sale, merger, or acquisition, the Expert receives a cash payment or equity based on the agreed terms.

Buy Back at a Nominated Date:
The company agrees to buy back the equity at a specified future date, providing a cash repayment to the Expert.

Payback with Interest:
The company repays the project fee with a specified interest rate over a defined period.

Custom Provisions:
Your custom redemption terms.

A risk margin is a surcharge or additional fee payable to the expert based on the venture’s stage of business. A recommended risk margin can be reduced by the expert or when the founder injects cash into negotiations. Refer to Deals for more information.

Adding cash to negotiations can dramatically reduce the risk margin payable to the expert. A founder can opt to add a cash component in the negotiation stage of the deals process. Refer to Deals for more information.

The Pitch Portal offers integrated contract-building and milestone management tools that are legally recognised instruments to ensure remuneration and service deliverables. Refer to Deals for more information.