A sweat equity agreement is a legal document that secures partners' rights to equity in a startup, emphasizing the need to recognize non-monetary contributions to prevent undervaluation of employees' efforts. The agreement should outline important terms such as the vesting period, type of equity, performance criteria, and separation criteria. Properly evaluating sweat equity is essential for maintaining the company's financial health.

1. Sweat Equity
Agreement
A sweat equity agreement is a legal document
signed by the partners that protect their right to
equity in the company. It is important to have
such an agreement between partners at the
initial stages of the startup

2. Failing to evaluate sweat equity is as
good as undervaluing your
employee’s hard work. If non-
monetary contributions are
unaccounted, it will affect the
valuation of the entire business.
Thus, sweat equity helps to monitor
the company’s financial health
Importance Of Sweat
Equity

3. Vesting period
Type of Equity
Performance criteria
Separation Criteria
Terms Should Be Included
In Sweat Equity Agreement