and a sweat equity agreement is a document that legalizes the terms of this exchange. each one is a crucial piece to the collective success of the business. it is important for startups to know how to calculate sweat equity as it lays a strong foundation among stakeholders for building value in the business. sweat equity agreements ensure that all parties bound by it commit to their contributions and are rewarded by the business. a founder’s sweat equity is their fundamental contribution to the startup and their rights have to be protected.