First gig

[ReneAigner]

Never work for free. You're much better off doing personal studies, improving on your weaknesses, than painting someone else's ideas for free.

[*] I get more portfolio pieces;

Unlikely since you will have to deal with all sorts of issues that come with work that someone esle gives you; it's not your personal vision, you don't like certain aspects that they made you put into the piece, you didn't have enough time to do you best... etc.

[*] I get a good rep with a startup indie company;

Nobody really gives a crap, unless you're saying you get a good rep with that particular startup, in that case they do give a crap, but only because you're someone they managed to hire for free.
True reputation comes from skill and from professionalism. Working for someone else without charging a fee doesn't fit in either category.

[*] I get credited for my work'

Again, nobody gives a crap, and you shouldn't either because I bet you'd rather be credited for your own personal work that lives up to your own standards than for the visualization of someone elses ideas. You can get that for free by publishing youir work online (FB, dA, here etc.). Word gets around. You don't need a "startup company" for that, they just want you to think that you do.

[*] I get to work on a game, which is my dream career at the moment

That shouldn't be a reason to work for free. If you can't get paid work, improve your skills. Don't wok for free.

[*] and I potentially open up a door for a paid gig in the future if their game takes off;
[/list]

They usually never do. Professional studios (even small ones and startups) will get funding somehow and pay you out of their own pocket if they have to. Asking someone to work for free is unprofessional. Period.

I suppose I could always work out some sort of deal for royalties if their game does well at all, right?

Royalties might be a bonus, they're not the same as payment. Don't work without pay, don't do spec work.

Don't. Work. For. Free.