Some friends have a great idea for a startup. I like the idea, and I think it will succeed, but I'm not in a place to work on it full-time. I can put in time on the side while keeping my day job.
So instead of paying me with a straight equity share, we're thinking about a scenario where I bill as a contractor and their debt to me is like a convertible note.
In other words, if I do a hundred hours of work at $10/hour, they'll owe me a thousand dollars. That debt is due at some point in the future or when they issue shares I can buy them instead.
For the sake of simplicity, assume no coupons and no discounts exist. We'll put all that into the rate I charge.
Are there any problems with this set up?