I've been approached by two startup heavyweights who offered to recommend me to VCs and angels for my startup (I'm the sole owner). They've asked me what percentage of equity I would offer them in return for this service and for them being on the board.
I have not raised any capital so far and have been running the startup for about 4 months with reasonably good traffic numbers. I am still in my full time job and I have no previous start-up experience.
Is there some industry norm for this percentage ? What conditions should I ask for ?
Thanks in advance!
In the words of Michael Corleone
"Senator? You can have my answer now, if you like. My final offer is this: nothing. Not even the fee for the gaming license, which I would appreciate if you would put up personally. "
Give them nothing. They want equity just to make an introduction? That is ridiculous.
What do you mean by "heavyweights"?
If they actually do provide value and are useful to be on a board of advisors then you can offer equity - but for just introducing you - that is nonsense.
Do you want them on your Board? Will they add value above and beyond an introduction to investors that brings investment capital in?
If the answer to both questions is 'yes' then equity could be exactly the right tool. And the question's a prompt to you thinking about the bigger question of what your startup will look like when it's a team. What equity do you want to reserve for executives, and what for Board members? If it were me, I'd want them to make a concrete ask so I could know where they were coming from - and get an idea of how much I could ask of them in exchange for sharing in the value I was creating.
If you'd like them on your Board but there's no real value beyond the introduction, it's less obvious whether equity makes sense. It can be worth having 'names' closely tied in to your company, but it's messy spreading equity too wide.
If you don't want them on your Board, I don't see how equity can make sense for you. If they're going to actively help you raise money, it's more usual to think about a percentage of funds raised. If there's nothing more than an introduction... well, the right VC or angel will want to find you, maybe it's time you looked at your local angel networks directly.