Operating equity, in practice

The operating equity model sounds simple in the abstract: we contribute studio resource and take a founding equity position in exchange. In practice, the structure of each engagement varies more than that summary suggests — and the decisions made at the start of the relationship compound in ways that matter enormously by the time a round is being priced.

We have done this enough times now to have convictions about what works and what does not. This is a field report on those convictions — written for founders who are considering a co-build arrangement and want to understand what they are agreeing to before they sign.

The cap table decision

The first decision is how the equity is held. We structure our position as a founding stake rather than a warrant or an option pool allocation — which means we are on the cap table from day one, with the same rights and dilution mechanics as any other founder. This is important because it aligns our incentives correctly: we are not trying to minimise our cash exposure while maximising our upside. We are exposed to the same downside as the founder.

We charge less than market upfront because we believe the venture is worth more than the engagement fee. If we do not believe that, we should not be doing the engagement.

The cash component of a co-build engagement is typically sixty to seventy percent of our standard rate for equivalent scope. The remainder is priced as equity at a valuation we agree with the founder before work starts. This means we are making a genuine bet — not hedging by taking both a full fee and a token equity position.