Sweat Equity
Ownership in a company earned through work, time and effort rather than a cash investment.
Sweat equity refers to the stake founders, early employees or advisers receive in exchange for their contributed labour, expertise or time instead of paying them in cash. It is how cash-poor startups reward the people who build the company before there is money to pay market salaries. In the UK, sweat equity is usually formalised through shares or share options with vesting schedules, and founders should take care over valuation and tax treatment when issuing it.
Examples
Two co-founders split equity to reflect the sweat equity each contributes pre-funding. — An adviser takes a small sweat-equity stake instead of a fee, vesting over two years.
How it relates to The Startup Foundry
Sweat equity shapes the cap table and team incentives investors examine closely. The Foundry's Investability Report and Learn/Improve modules help founders structure equity and vesting sensibly, so the company looks investable when it reaches the Funding Sprint.