The Equity Agreement for Service ("EASE") is a free legal template for entrepreneurs to offer equity to service providers instead of cash.
It is being released as a "Beta" version to gather comments and input from the startup community.
Entrepreneurs need critical services at the earliest-stages of their startup journey, but many lack the financial resources. The Equity Agreement for Service (EASE) can potentially help these entrepreneurs by providing an alternative way to compensate service providers.
EASE contains special provisions that give unique rights and protections to both entrepreneurs and service providers, without hampering either side. The entrepreneur has the security of knowing they are not overextending equity potential, while the service provider can feel confident that they will receive an equitable reward for their contribution if the venture is successful.
It was developed by the Founder Institute, with assistance from experienced Silicon Valley startup lawyers.
The greatest risk of an equity-for-service engagement is picking the wrong service provider. As a result, we do not recommend using using an equity-for-service engagement with any service provider that you have not previously worked with.
It is always important to properly evaluate service providers, and it becomes even more important if you are considering equity compensation. At the very least, we recommend every entrepreneur follow the steps below to properly evaluate any service providers before engaging in an equity-for-service relationship:
1. Work with them on a small project: Ideally there is a pre-existing relationship, but if not, you should engage them on a smaller project to validate their capabilities and working style.
2. Validate their startup experience: Working with startups requires a level of flexibility many service providers do not have. Even if they are a very experienced company, make sure they have experience working with startups at a similar stage as you.
3. Interview previous clients: Get introductions to previous clients to learn about their experience. Do your own research online to find other past clients that they don't introduce you to.
4. Get a laywer: If you decide to move forward with an equity-for-service engagement, be sure to include a laywer. This agreement is not intended to replace legal counsel - it is only intended to reduce your legal costs.
The Founder Institute's mission is to empower talented and motivated people to build technology businesses that positively impact the world, and releasing free legal templates can help reduce the legal costs of starting a business for many entrepreneurs. In the past, we released a free standard Advisor agreement (FI.co/FAST) that is now used by thousands of startups every year. We are hoping the EASE Agreement can be simililarly helpful.
The EASE agreement can help founders with limited financial means get access to invaluable resources, such as technical advice or product development expertise, at a fraction of traditional rates.
The EASE Agreement is designed to save time and money negotiating equity compensation for services. There are just two pages to fill out.
You can use the EASE agreement to engage design, development and product agencies or freelancers.
The EASE agreement gives you two options on vesting your equity with the service provider. The service provider's shares can vest on a pro-rata basis until the expected services are completed, or it can vest upon completion of the expected services.
You need to specify the governing law on the signature page.
This section establishes a confidential relationship between you and your contractor. It protects your company information from being used by the consultant for their own gain or from sending the information to a competitor. This is a simplified version of an NDA - Non Disclosure Agreement. You are welcome to use your own NDA agreement along with the EASE Agreement.
Any information, technology, intellectual property, and inventions that your consultant creates, while during the duration of this contact, belongs to your company. You can freely modify anything they provide you and they can not charge you for use of this technology outside of this agreement.
1.Total Number of Shares of Common Stock. List the number of shares you have available. This is to confirm that shares are available.
2.Type of Security. Restricted Common Stock is similar to Common Stock, but is only granted once certain requirements are met (such as the deliverables outlined in this agreement). You will need to have a separate Stock Options Agreement in order to issue the stock options.
3.Vesting. Select if you would like to issue options as the consultant works with you or if you would like to issue options once the work is completed. If there are any unvested shares within 90 days of the completion of work, you may purchase back those shares.
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