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Every single early stage company I know does this.

This is super common in the Valley. This isn't the exception it's the norm.

Every single angel investor I have ever pitched asked for/suggested this.

If this is illegal 99% of the Valley is committing fraud.

This is so incredibly common and is actually taught as tactic at many accelerators.

You can form "customer advisory boards" which basically pay small percentages of common to early users to use the product.

Like, seriously, more than half of the companies funded by YC do this. I think this is the norm more than the outlier.