Why might an investor choose to provide sweat equity?

An investor might choose to provide sweat equity primarily to contribute talent and effort to a venture. Sweat equity involves an investor investing their time and skills instead of or alongside financial capital. This is particularly common in startups where cash resources may be limited, and the entrepreneur needs individuals committed to working actively in the business.

Providing sweat equity allows investors to leverage their expertise and experience in a way that can significantly increase the value of the enterprise. It fosters a deeper commitment to the success of the venture, as the investor is not only financially invested but emotionally and operationally involved as well. This hands-on approach can lead to better decision-making and strategic contributions, ultimately benefiting the company and potentially increasing returns on their investment in the long run.