I would think that the moment you're offered 40% of a company, your first thought would be "this guy clearly doesn't believe in this company himself, or else he'd never offer me that much of his company". There are so many options available, be it leaving no stone unturned to find some additional cash (bank loans, borrowing from family, cashing investments, etc), or offering a non-equity profit sharing arrangement, that there's really no excuse for giving up large chunks of equity until you're receiving serious capital in return. This just sounds like a stupid deal to offer, and a worse one to take.