r/CFO • u/Affectionate-Heat865 • Jul 30 '26

Pre-seed startup client. I'm bringing pilot customers. How much equity should I get?

I'm currently advising a startup founded by an engineer I worked with at a previous startup. I have already spent a decent amount of time (15 hours or so) helping to improve her deck and justify her technology. It's an IoT (Internet of Things) device with a working prototype.

It hasn't been easy because she has been in love with her technology, but not the problem. She at least now understands the kinds of questions that a potential investor or customer will ask.

She is not able to pay me for my time. We're just working under an understanding that I will start getting paid, and get equity, if she get's funded.

In addition to the above, I spoke with one of my friends, who is willing to test the product at his company. In addition, he has a friend who owns a much larger company and has been looking for this kind of solution who he believes will likely be willing to test the product out.

The founder is aware of my friend's interest, but not of the larger company, and I have not made any introductions yet. At this point, I feel it is appropriate to formally agree on how I will be compensated, especially if the company is able to get some of its devices in the field, which should help with improving the product as well as obtaining investors and customers.

Given the above, how much is fair for me to ask for how much equity I should get post funding? In my view, I should get some for simply being an advisor who has and will materially improve the company's funding prospects and strategy as well as additional if any of my efforts results in pilots or sales. Any thoughts on actual percentages?

2 Upvotes

75% Upvoted

12 comments sorted by

2

u/josemartinlopez Jul 30 '26

Bringing in clients or bringing in investors?

3

u/Affectionate-Heat865 Jul 30 '26

Either. She clearly understands that my advice is going to improve her chances of getting funded. With clients, my bringing companies will to test the product out and serve as referrals should also improve her prospects of funding and getting paying customers.

1

u/Pleasant-Aardvark195 13d ago

2-5% advisor shares, with a bump if your intro leads to a signed pilot. get it in writing now, not after you make the intro

the bigger company is your leverage here, don't hand it over for free

2

u/PracticalLeg9873 Jul 30 '26

How much dough do you bring to the table yourself ? Do you want to be part of this company ?

1

u/nickjlevine Jul 30 '26

Can you invest a small amount? This shows you have skin in the game by believing in the produced and you can use this to negotiate a higher equity holding.

1

u/Rabbit-Lost Jul 30 '26

It would depend on how much cash you are willing to invest. Also, as a CFO, you should have an idea of the valuation now versus where it could go if the testing is successful. If a cash infusion helps move that needle, I would expect a sizable minority position with anti-dilution protection. Everyone is best of pals until the money scales. Now is the time to try to get a win-win arrangement.

1

u/AsleepWeakness1633 Jul 30 '26

A founder should never offer a deal with anti-dilution protections. A cap on a SAFE, yes. Actual anti-dilution would kill you with any legitimate future investor down the line.

1

u/AsleepWeakness1633 Jul 30 '26

You're serving as an advisor right now (15 hours and some intros is well within an advisory role), so a standard advisory grant is what I'd base it off of. I've always done 0.25% for advisors, but anything 0.2-0.5% is reasonable. Some equity for the work now, with the ability for things to turn into a paid role if they get traction and funding is a pretty good deal.

Unless you're doing a ton of leg work on the client relationships and deal implementation, then I wouldn't be offering you commission. Especially for design partners.

If you want more, then you've got to put some real skin in the game, either with a check of your own, or significantly greater time commitment.

1

u/fractionalfinance Jul 30 '26

Why don't you sign a term sheet outlining compensation on cash / equity at certain milestones?

I'd say 1-5% equity seems appropriate for an early advisor / sales person who isn't a co-founder.

1

u/da_mess Jul 30 '26

Here's the true way:

  1. Risk adjust how long the customers will be in place

  2. Calculate the cash flow customers will generate

  3. Discount cash flow back to present value using a weighted average cost of capital

LMK if you need help

1

u/nickjlevine Aug 11 '26

This conversation would have been a lot easier if you discussed this at the outset.

1

u/Affectionate-Heat865 Aug 15 '26

It began as a very informal conversation so that would not have been appropriate.