In his post ‘Pervasive Startup Myth: Don’t Work for Free’, Tim Berry explains why investors are generally not impressed by start-up founders working for free: “Investors want people committed to working their startups, and that usually takes getting them paid“.
From my perspective and experience, there are lots of good reasons for not working for free and a few caveats:
- working for free or cheap will not demonstrate if your business model really works at the normal price it should command, and the market price of the contributors,
- working for free or cheap does not favorably reflect on the value you provide to the client,
- entrepreneurs still have to provide for their family, and even if their significant other can compensate for a while, it is not a sustainable proposition.
There are a few caveats from my experience and practice though:
- In my companies we do account for what the founders or partners should get paid but we may postpone payment of part of it to protect cash flow, which is what really counts in startups growing rapidly (fixed salary would be typically be quite low, and ‘bonuses’ paid when cash flow is good),
- There are instances where working cheap to establish oneself in a new market might be a conscious choice. It comes with the difficulty of raising prices later, so should rather be presented as a special discount against a normal price rather than a low price,
- Sometimes working for a low price but being compensated on knowledge and exposure might be a good deal, but it needs to be strictly limited in time.
So, stop working for free when you deliver value to your clients: stop devaluating yourselves!
