I'm working to develope a sturtup and its core business is similar to UpWork. at the moment we are three in the team, me (CEO at 51%), a guy (CTO with 20%), another guy (Front end dev. around 5%) and the rest available for funders. Is it reasonable to involve a funder with a 20% equity?
There is absolutely nothing wrong with that, it all depends on the funding capacity. If your startup will be fully capitalized with the investment, I'll advise you to go ahead. Is it not better to have the ear of an elephant than to have a full rabbit?
There are no min/max. I suggest you read this: https://blog.ycombinator.com/how-to-raise-a-seed-round/
This is all based on what you do with the money you take and where you go with it, if you dilute yourself too much early on and cannot bootstrap you run the risk to be a minority owner early on. you need to outweigh the cash received early which is a risky amount no matter what you think vs. where it gets you. if anywhere.
We just turned down $2.5M from a group only interested in control. we willing to give allot at a lower valuation for a mere $300K but this takes us to a much higher valuation down the road.
without context it's impossible to answer your question. the context is provided by whether you have a product, whether you've some traction, and are profitable, whether you need the money to stay alive, or whether you are profitable already and just need the funding to amp up your customer acquisition model. will this funders money be the only money you need ? will he be able to put in a follow-on round ?
the other way to look at this is that this funder will have nearly the same volume of equity as your CTO. will the funder be bringing the same total value as an individual? your CTO is working every day to build the company. money should not be enough to get a seat at your head table. they should be able to provide something else that your management team is missing. whether that's technical skill, or business development. something that you need critically to move forward. that should be part of the deal. if they are, then 20% could well be reasonable.
hope that helps... and good luck :-)
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