Fundraising
How much equity should you give investors?
Quick Answer
Standard dilution is 15-25% per funding round. Seed rounds typically sell 15-20% equity, Series A sells 20-30%. Founders should retain at least 50% through Series A to maintain control and motivation.
Detailed Answer
The amount of equity to give investors depends on how much you're raising and at what valuation. The key formula:
Investor Ownership % = Investment Amount ÷ Post-Money Valuation
Typical equity sold per round: - Pre-seed: 5-15% (SAFE, small checks) - Seed: 15-20% ($1-3M raised at $5-15M post-money) - Series A: 20-30% ($5-15M raised at $25-60M post-money) - Series B: 15-20% ($15-40M raised at $100-250M post-money)
Founder ownership trajectory (typical): - After seed: 70-80% (2 co-founders) - After Series A: 50-60% - After Series B: 35-45% - At IPO: 8-15% per founder
Key considerations: - **Don't optimize for ownership alone** — 10% of a $1B company > 90% of a $1M company - **Option pool** — VCs often require a 10-20% unissued option pool before pricing, which dilutes founders, not investors - **Board control** — Maintain board majority through Series A if possible - **Vesting** — Standard 4-year vest with 1-year cliff applies to founder shares post-funding
Red flags: Giving up >30% in any single round, or falling below 50% founder ownership before Series B.
Related Questions
What is dilution in startup funding?
Dilution is the reduction in an existing shareholder's ownership percentage when a company issues new shares, typically during fundraising rounds. Founders typically experience 15-25% dilution per funding round.
What is a cap table?
A cap table (capitalization table) is a spreadsheet or document that shows a company's equity ownership structure — who owns what percentage, including founders, investors, employees with options, and any convertible instruments.
What is the difference between pre-money and post-money valuation?
Pre-money valuation is a company's value before new investment; post-money is the value after. Post-Money = Pre-Money + Investment Amount. A $10M pre-money with $2M invested = $12M post-money, giving the investor 16.7% ownership.
What should be in a startup pitch deck?
A VC pitch deck should be 10-15 slides covering: problem, solution, market size, business model, traction, team, competition, financials, the ask, and use of funds. Keep it visual, concise, and story-driven.