Deferred Compensation for Startup Consultant?

Question

Hi, I imagine it's a common situation for specialist consultants working with startups, who can't quite afford to pay them in cash, to work out alternative payment arrangements.Being paid in stock is one option, but how common is it to be compensated by debt (which presumably would be paid only if the startup survives long enough)? Maybe in the form of a non-recourse note, maybe in the form of payment due after an extended period (year+), or perhaps convertible debt?Anyone have experience with such arrangements, cautionary tales, tax implications?

smt88 · Accepted Answer

Startup debt and equity is, in practice, worth $0. If they can't pay anything in cash and badly need a consultant, they're definitely going to fail. That means that they don't have enough cash to operate (which is already a good sign they're going to fail) and they don't have the expertise to even build a company in the first place. Don't waste your time.

willcate · Answer

If my experience is anything to go on, you will never see any money.