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Unless you’re sitting on a comfy cushion of your own private financing… don’t. Best case scenario, your stake gets watered down to nothing by successive funding rounds. Worst case, they flop and you worked for nothing — or, a VC strongarms them into a terms sheet that wipes out their existing cap table to maximize fund returns.
Take the cash, leave the toilet paper “shares.”
Dilution of equity is inevitable. It’s a risk, like a lottery ticket. Assume it doesn’t exist. If you’re pre-seed then yeah, equity is worth zilch. I my experience if you’re working for just equity, don’t do it.
Unless you’re one of the first 5 to 10 employees, I would never do this.
There was a whole site around this called AngelList. In many cases, it was companies looking to hire their first CTO, first engineer, or first product person. It’s rarely worth it for anyone beyond those first 5 to 7 hires to take that gamble.
I don’t think this one is really like that. More like some people starting a package good brand in their garage. My thought was come in in an advisory role for a small stake and see how I like working with them/how real they are. Basically just buy the lottery ticket on the off chance they hit big. I’m not super worried about the work or the money. I have a full time job and it seems like a decently fun challenge.
But I don’t know how realistic that is.
I mean, if you like donating your time for lottery tickets, go for it!
CPG is a highly competitive space. If you can navigate the waters, it can be lucrative. But patents and/or a very distinct moat are very important to be successful.
I work with startups often and always begin with cash payment. Once I get the lay of the land and if I see a future, I renegotiate to be paid half in cash, half in equity.
Pro
Don't. Even if it pays out, the company will be three to five years away from a liquidity event. VCs will discourage the founders from giving away random favors like this, as it makes the cap table look bad.
Maybe you get unbelievably lucky and double your money in 2029. More likely you are working for free and subsidizing a founder that couldn't afford you in the first place.
3 to 5 years is very fast. Many companies are staying private for longer.
C.R.E.A.M.