Huddle makes equity payments easy through its own agreement called the CAFÈ (Creator Agreement for Future Equity.) The CAFÉ is an adaptation of the FAST Agreement (Founder/Advisor Standard Template) created by the Founder’s Institute.
Fractional work is becoming how startups launch, build, and grow. We believe in the independent workforce and that startup founders and contributors are better served through fractional agreements. This includes equity, which has been challenging to understand, account for, issue, and receive. In fact, there has been no standard way for startups to issue equity to fractional, independent workers. We are not discussing advisors who receive equity for information, advice, and relationships. We are only concerned with boots-on-the-ground builders who get their hands dirty by doing real work on a startup.
We decided to “open source” the CAFÉ because independent workers, builders, designers, freelancers, and creators would benefit from a standard equity exchange. So would startups looking to utilize fractional workers.
<aside> 📈 Download the CAFÉ from Google Drive
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The CAFÉ takes a dollar amount of work, typically performed in exchange for cash, and translates dollars into future common stock. The amount of equity (common stock) exchanged is based on a startup’s stage and progress.
Future common stock can be restricted stock or options: RSAs (restricted stock awards) or NSOs (non-qualified stock options). ISOs (qualified stock options) are available only to W2 employees and unavailable to fractional workers due to the 10-99 tax status of contract work.
Below are some best practices for using the CAFÉ based on how use it at Huddle.
We’ve been facilitating equity payments at Huddle since 2020. Before Huddle, we experimented with “sweat equity” startup investments since 2014. We’ve learned a thing or two, and we hope our standard agreement makes investing with time easier. We also hope it helps startups attract better workers with aligned incentives, decreasing a startup's need for expensive preferred shareholders and angel investors who may not be valuable beyond cash.