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Should you work for free?

I design a lot of investor presentations (hey, Google views me as the #1 investor presentation designer!), including pitches for startups. And companies that need to talk to investors are by definition short of budget. Many startups ask me whether I consider working for a delayed fee. Usually, I say "no" and that sounds harsh to a boot strapping startup. Here is a ruthless profit seeker trying to extract money from a small, fragile, company that could do amazing things for the world.

Here are some points to remember, and I invite all freelancers to use them where appropriate:

  • Deferred payment is real money. Yes, you are not selling a physical product (nobody would walk into a car showroom and have the guts to ask for free vehicles with payment after the next fund raising round, if it happens), you sell time. But there is a real opportunity cost to working on one project: you cannot work at the same time for a client who does pay cash.
  • Deferred payment is your own money. Most startups have some sort of funding, which means that they benefit from OPM (other people's money). Freelancers cannot. It is their own cash. (In my case where I am funding SlideMagic from own personal savings this argument is especially true).
  • Startups do not equal charity. Startups want to become a commercial success. Doing pro bono work fore a cause you belief in does not equal providing free work to a company that is raising money.
  • Success fees have to be so large that no startup will pay them. Venture capitalists require that their investments need to return 3, 5, 10 times their money. And VCs invest in a stage of a company where at least one risk has been eliminated: funding risk. The designer working on an investor presentation comes in before that, which would merit an even higher return. No startup has agreed to pay 10x the price of a regular project.
  • The carrot, we will generate lots of work for you in the future does work for a big company that needs to feed a big fixed cost infrastructure. A successful freelancer will have no problem filling her work pipeline with other clients.
  • This startup is not the only one. I get these type of requests every week. If I would say yes, I could spend 120% of my time working on a deferred payment basis. Why should I say "yes" to this startup and turn down the other 10?

And finally, there is a psychological argument here. Over the past 10 years, I have had very little success with deferred payments. Usually the startups who believe in themselves, pay cash, and stay happy clients for many years. The ones that seek deferred payments somehow don't make it, as if they know something already.

What is the solution? Some startups are happy to pay for a good investor presentation and see it is a crucial investment to get through the very first stages of their company. In other situations, I try to find a working model where I can be involved less to get to an acceptable result for a much better price.


Art: Giacomo Francesco Cipper - Peasant Repast with a Young Beggar, 1725
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