Every founder who asks me to take equity instead of cash is really asking the same question: can I get senior technical judgment without spending money I do not have yet? Sometimes the answer is a clean yes. More often the equity offer is a signal that the engagement is priced wrong, or that the founder has not thought through what a small percentage of the company is actually worth on the day it matters.
I have been on both sides of this. I have taken equity-heavy deals that paid off and cash-only deals I was glad I insisted on. Here is how I think about the trade now, and the numbers that should make you pause.
What equity actually buys, and what it does not
Equity does one useful thing: it aligns me with the outcome. If the company is worth more in three years because I made good calls, I share in that. That alignment is real and it changes behavior. A fractional CTO with a meaningful stake argues harder against the expensive rewrite, pushes back on the vanity hire, and treats your runway like their own money, because it partly is.
What equity does not do is pay my mortgage this month. That matters because it sets a floor on how little cash a good operator can accept. If the cash portion drops too low, the people who can afford to work that way are either very early in their careers or already wealthy. Neither is who you want auditing your architecture before a raise.
Equity also does not fix a bad scope. If you cannot describe what you need in a sentence, handing over shares does not make the work clearer. It just makes the eventual breakup more awkward.
The numbers that should worry you
The current market for a part-time, non-cofounder fractional CTO sits around 0.5 to 2 percent equity, almost always paired with a reduced cash rate rather than replacing it. Vesting over two to four years with a cliff is standard. That range is wide because it tracks stage: a pre-seed company with no product commands the top of it, a funded Series A company the bottom.
Two things should make you slow down. First, any request above roughly 3 percent for a part-time non-cofounder. At that point the person is asking to be treated like a founding team member on a fraction of the hours, and the math rarely works for you at the next round. Second, an equity-only deal with no cash at all. Those almost always end badly. With no cash on the line, the engagement quietly drops to the bottom of everyone's priority list the first week something else pays better. If someone offers to work for pure equity, ask why their time has no floor price.
A reasonable structure at seed keeps cash at half or more of the total engagement value and treats equity as the upside, not the salary. A common shape is a reduced monthly retainer plus 0.5 to 1 percent vesting. You can see how that stacks against a straight retainer on the pricing page, and it is worth reading what a retainer actually buys each month before you decide equity is the cheaper path. It usually is not cheaper. It is deferred.
When cash is the smarter choice anyway
If you have raised, pay cash. Equity is the most expensive currency you own, and spending it to save a few thousand dollars a month when you have money in the bank is a bad trade you will feel at the next round. Investors also read the cap table. A crowded table full of small advisory grants looks like a founder who gave away pieces to avoid writing checks, and it invites questions in diligence you would rather not answer.
Cash is also cleaner to end. A cash engagement that is not working stops with 30 days notice and no residue. An equity grant that is not working means a vesting schedule someone is still riding, a conversation about accelerated or clawed-back shares, and a line on your cap table you now have to explain. The cheaper-looking option carries a tail.
The honest version of the trade: use equity to bridge a genuine cash gap at the earliest stage, cap it low, keep real cash in the deal, and switch to a mostly-cash retainer the moment you raise. If you are staring at a tight month rather than a permanent constraint, the better tool is scoping the work down, not handing over shares.
How to structure it if you do offer equity
Keep four things in the agreement. A vesting schedule with a cliff, so a short engagement does not leave someone holding a year of stock for a month of work. A clear cash component, so the person has skin in the day-to-day and not only the exit. A notice period that ends the cash cleanly, 30 to 60 days for both sides. And a written scope, so both of you know what the shares are buying. Equity without a scope is just a bet with no rules.
Get the grant papered properly through your counsel, not on a handshake. The number of early companies that agreed on 1 percent verbally and then argued about the terms two years later is higher than you would think.
FAQ
How much equity is normal for a fractional CTO?
For a part-time, non-cofounder engagement, roughly 0.5 to 2 percent vesting over two to four years, paired with reduced cash rather than replacing it. Pre-seed sits at the top of that band, funded companies at the bottom.
Is an equity-only fractional CTO ever a good idea?
Rarely. With no cash on the line, your engagement becomes the first thing that slips when the person gets a paying client. Keep cash at half or more of the deal so your work stays near the top of the pile.
We just raised. Should we still offer equity?
Usually not. Once you have cash, paying with equity to save a little monthly spend is an expensive trade you feel at the next round, and it clutters the cap table. Pay cash and keep equity for people joining the core team.
What equity ask should make me walk away?
Anything above about 3 percent for a part-time non-cofounder, or a pure equity deal with no cash. Both mean the engagement is priced or scoped wrong. Fix the scope before you fix the number, and if you are unsure the spend is worth it at all, work through whether a fractional CTO is worth the money first.