Sweat Equity

Thanks to Shashi Tharoor & Sunanda Pushkar who have given a limelight to a sweet term called as Sweat Equity.

Sweat equity is a term used to describe the contribution made to a project by people who contribute their time and effort (by sweating). It can be contrasted with financial equity which is the money contributed towards the project.

The concept of Sweat equity is a familiar thing in startup companies. It happens often in a start up company that an employee does not have cash but he or she has the talent and skill to make the company successful. Sweat Equity Shares are given to the employees at a discounted rate of market value.

The whole idea behind giving Sweat Equity is to make the employee feel that he/she is a part owner in the company. When employees feel their company has their own funds invested in it, they get better motivated and work more earnestly towards company’s progress.