The common structures
- Cash plus equity. A reduced fee plus a small stake, usually vesting at milestones such as launch.
- Revenue share. Part of the fee is a share of what the product earns, for an agreed term, often capped. Common with creators who bring the audience.
- Savings share. For established companies: part of the fee is a share of the cost a tool saves, measured and capped.
- Equity only. Rarely works for either side. Good studios need cash to keep a team on the work.
The math
The cash a studio gives up, divided by the stake it receives, is the valuation you are agreeing to. If a studio forgoes $20,000 for 2 percent, it values the company at about $1 million. Compare that with your last round, or your next one.
Red flags
- Equity with no vesting or milestones.
- Code licensed to you instead of assigned to you.
- Revenue shares with no cap and no end date.
- Terms nobody wrote down.
How we do ours
It depends on the company: an ongoing fee, a fixed price for a defined project, and sometimes a capped share of measured savings. With creators and people who have an audience, we build and run the product and part of our fee is a share of what it earns. Always written down, always with a clear term. Working with creators.