Human capital: cash-strapped startups swap private equity for sweat equity.

• Author: Caley, Nora
• Position: FirstWheel Accelerator - Brian Tsuchiya - Bruce Macdonald

brian Tsuchiya says it's easier to get people to work for free than it is to find venture capital. That's why he launched his newest company, First-Wheel Accelerator. Its business model relies on "human capitalists," or contractors, who agree to work for a startup business without pay but for a future stake in the enterprise. Tsuchiya calls that "sweat equity," a term usually reserved for the long hours any entrepreneur spends creating his or her own new business. But Tsuchiya gives the words a different twist.

"We're giving them alternative currency," he says of the capitalists who are investing their work in the potential dollars-and-cents value of the startup. "What they get back is an equal exchange." And with FirstWheel Accelerator he offers "investors" a 41-page contract to seal their deal.

Tsuchiya himself is a serial-entrepreneur who is also more of a self-confessed idea man than an operating CEO. He has started eight companies and counts seven of them failures, and he's not bashful about admitting to court actions that resulted from them. That's why he has sworn off the chief executive title and stays involved now in only the formation and run-up to product of the businesses he starts or gets involved in starting.

That's also why he has walked away from Walking Orbit, a Longmont company that makes tracking and messaging software for owners of vehicle fleets, which he helped start two years ago.

Bruce Macdonald is now senior vice president of sales and marketing for Walking Orbit. He joined the company last January after he had sold his own company, which provided home-health services. Macdonald says Walking Orbit probably wouldn't have been launched without the human-capitalist model.

"The original founders did not have money to start the company," he says. "The human-capitalist model accelerated our ability to get started." Tsuchiya ran Walking Orbit and instituted his worker/investor business model doing it. The workers, he says, hope to become part owners of something like the next Google.

"If you look at wealth-creation opportunities in the last decade, you had the stock market and real estate," he said. "I think private equity is the next opportunity." Walking Orbit's software product is now in beta testing, and Macdonald says the company is shopping for real venture funding in the range of $1.5 million. Tsuchiya figures he saved the company $2 million with his alternative to paying about 100 workers for about 100,000 hours of...