Funding from investors is more valuable moneywise than funding via developer equity because it gives you cashflow.

In the real world, you can't spend a negative balance even if it is higher than an alternative negative balance.

I agree, though, that once you do have sufficient cashflow, then the two are equivalent.

Don't be silly. Money not spent, is very, very different from money in the bank. It's 'virtual' in that sense. If there is a corresponding balance somewhere that isn't debited because you didn't spend it, then yes its sort-of the same.

But startups do not run that way. You might want to familiarize yourself with startup finances. They run on cash flow - and its all negative. When investor dollars run out, everybody goes back to working for the man.

An example might make it clear. If you compare spending $100,000 on a developer's salary vs $50,000 and stock, you might be fooled into thinking you've saved $50,000.

But there never was $100,000, at least not for salary. Its a false comparison. What you can really do is, either hire a guy for $50,000, or don't hire him.

If you hire him, you're getting another man-year of development done in the next year. But your out-of-cash-and-failing condition is brought $50,000 closer. Its a gamble - will that man-year of development get us to another milestone before the now-closer deadline of 'broke' arrives? Who can tell - you just make your best guess and close your eyes, hope you found the right guy and sign the employment papers.

If you don't hire, then you spent $50,000 less, which means you can last longer but now depend upon the founders to get All the development done. While starving, neglecting their health and generally undergoing tremendous stress. IF they can devote say half-time each (2 founders in the example given) then maybe its a wash (except for the suffering and depression part), cash-wise.

But there's also risk associated with being 1 year later to market. Things change, your partner may change, your spouse may get fed up.

So, yes, when your Markov chain of money-events include 'broke' then it makes a very big difference whether you spend money or save it. Its all in the risk, time and stress equation, and involves probabilities that can be hard to estimate.