How each model works
A software agency sells development as a service. You describe what you want, they quote it, you pay, they deliver. The relationship is commercial and it ends when the project does.
A tech-for-equity partner builds the product in exchange for a share of the company. Its return depends on the company succeeding, not on the size of the invoice. The Loop Ventures works this way, as a tech-for-equity venture studio.
The comparison
| Software agency | Tech for equity | |
|---|---|---|
| You pay with | Cash, in full | A minority equity stake |
| Risk if the product fails | Yours alone | Shared |
| Incentive | Deliver what was quoted | Build what makes the company valuable |
| Scope changes | Billed as extras | Decided together, as partners |
| Selection | Takes any client who can pay | Takes few companies, after evaluation |
| After launch | New contract | Stays on as technology partner |
| Your ownership | 100% of the company | The majority of the company |
When an agency is the better choice
An agency is a good fit when:
- You have the cash and would rather keep all of your equity.
- The project is well defined and unlikely to change.
- You are building a tool for an existing business, not a startup.
- You already have someone technical who can direct the work and judge its quality.
If those describe you, hire a good agency. Equity is the most expensive currency a founder has, and you should not spend it when cash will do.
When tech for equity is the better choice
Tech for equity fits when:
- The cost of building is the thing stopping you from launching.
- You have validation, and an advantage in your industry, but no technical team.
- You expect the product to change as you learn from real users.
- You want a partner who is affected by the outcome.
The hidden cost of each
With an agency, the hidden cost is everything after the first version. Startups rarely get the product right at launch. Every change is a new quote, and the budget that was enough for version one is often gone before version two.
With tech for equity, the cost is ownership. You give up a share of something that may become valuable. That is a real price, and it only makes sense if the partner adds more than they take.
How The Loop Ventures handles it
We take a minority equity stake, agreed at the start. In most cases there is also a commitment fee, a fraction of what an agency would charge. The product and its intellectual property belong to your company. After launch we include a support period, and then agree maintenance as a monthly fee.
The full process is on how it works, and the products we have built this way are in the portfolio.
The question to ask yourself
Would you rather have a supplier or a shareholder? If you want full control and have the budget, choose the supplier. If you want someone on your side of the table, apply with your idea.