I was contacted by a startup to build an iOS app for their prototype hardware product. I quoted my hourly rate, but they said they didn't have any funding yet and offered me equity. At this point I would normally walk away, but their project sounds cool, and I don't think it would be a huge time commitment to make their app.
So what are best practices for negotiating a fee paid in equity?
One method I've thought of would be to go ahead and bill at my hourly rate, and then convert that to equity at their current valuation. I guess I would have to determine whether I thought their valuation was BS or not, and maybe adjust my own rate accordingly.
Another method would be to just do the work for a fixed percentage of the company, but that has all the problems of a fixed bid contract, I would think, such as scope creep and me underestimating the time it would take.