Sweat Equity

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Startup Terms Glossary

• Series B Round
• Series Seed Financing
• Single Trigger Acceleration
• Small Business Investment Company
• Staggered Board
• Stock Options
• Stockholders
• Strike Price
• Subordinated Debt
• Super Angel
• Sweat Equity
• Syndication
• Tag Along Rights
• Taxable Event
• Technology Transfer Agreement
• Ten Bagger
• Term Sheet
• Unsecured Debt
• Valuation
• VC Fund
• Venture Backed Startup

What is Sweat Equity?

Sweat equity is a financial term used to define a person or entity’s contribution to the early stages of a startup. Sweat equity is not monetary and instead refers to the amount of effort put into the success of a startup during its early stages. The labor that determines sweat equity is unpaid and can also refer to mental efforts and amount of time spent on projects.

Sweat Equity Examples

Examples of sweat equity:

• Example 1. Improvements made to a startup resulting from sheer effort
• Example 2. Owners often accept low salaries in exchange for sweat equity
• Example 3. Often used in startups that don’t have the cash flow to support high wages

Here’s another web page about sweat equity and how it is calculated.

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Meet some of our Sweat Equity Lawyers

Linda M.

Linda M.

I am a seasoned corporate transactional attorney with over 20 years of combined outside and inside General Counsel experience. My experience includes helping companies of all sizes, including start-ups with general corporate matters and commercial transactions.

Keidi C.

Keidi C.

Keidi S. Carrington brings a wealth of legal knowledge and business experience in the financial services area with a particular focus on investment management. She is a former securities examiner at the United States Securities & Exchange Commission (SEC) and Associate Counsel at State Street Bank & Trust and has consulted for various investment houses and private investment entities. Her work has included developing a mutual fund that invested in equity securities of listed real estate investment trusts (REITs) and other listed real estate companies; establishing private equity and hedge funds that help clients raise capital by preparing offering materials, negotiating with prospective investors, preparing partnership and LLC operating agreements and advising on and documenting management arrangements; advising on the establishment of Initial Coin Offerings (ICOs/Token Offerings) and counseling SEC registered and state investment advisers regarding organizational structure and compliance. Ms. Carrington is a graduate of Johns Hopkins University with a B.A. in International Relations. She earned her Juris Doctorate from New England Law | Boston and her LL.M. in Banking and Financial Law from Boston University School of Law. She is admitted to practice in Massachusetts and New York. Currently, her practice focuses on assisting investors, start-ups, small and mid-size businesses with their legal needs in the areas of corporate and securities law.