When your biggest customer asks for equity, not discounts

What it means when your customer wants a seat on your cap table, not just a signature on paper

Author

Michael Morgenstern
September 02, 2025

Happy Tuesday Brex Community,

The warrant request usually shows up right as a company breaks into a different league. Around $8M–$20M in revenue, when enterprise customers start to dominate. You close a big multi-year deal, and then comes the ask: a warrant for 1% of the company at today’s valuation. If you’re valued at $1/share and grow to $5/share, they pay $1M for stock worth $5M. That’s $4M of upside for them. And 1% dilution for you. For the customer, it’s a free call option. For you, it could be permanent cap table liability.

This is where discipline matters. Warrants aren’t inherently bad. They can align incentives and help close transformative customers. But they’re also precedent-setting. If one Fortune 500 extracts a warrant, others could try. Smart CEOs know they need people around the table who understand these structures cold. I’m seeing many founders hire talent with two years in banking, two years in PE, as BD/Chief of Staff/VP Finances and Ops. They model dilution, but they also sell, lead BD, and negotiate. In other words, they turn a potentially messy ask into a deal you can live with — one that drives revenue today without giving away the future.

Growing together, Michael Morgenstern 

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