View from Seed

JULY 29, 2020

I like to say that selecting a co-founder is the single most dilutive decision that a founding CEO can make, and so that decision can send all sorts of signals about a founder’s priorities, judgement and personality. We are not zealots that founding CEO’s must have cofounders or that the equity splits should be equal.

Cofounder 408

Cofounder Technical Cofounder Founder Equity 408

VC Cafe

FEBRUARY 27, 2024

In smaller funds, ticket sizes tend to be lower, so pre-seed is the only stage where micro funds are able to secure their minimum equity targets. There are of course anomalies, like French AI startup Mistral which raised a “seed” round of $113M in June last year.

Valuation 186

Valuation Software Review Generative AI Technical Review 186

Gust

APRIL 9, 2014

Equity dilution works when the same pie is divided among more people. Over time, other people receive pieces of equity in exchange for work (employee stock options), money (seed, angel and venture investors), services (attorneys, directors, etc.). Uncategorized company equity dilution founder investors startup'

Dilution 150

Dilution Equity Vesting Stock Options 150

Startup Professionals Musings

AUGUST 4, 2014

The first question I usually get is what percent of the company or equity is that person worth? Just because it was your idea doesn’t mean you “deserve” 90 percent of the equity. The value in a startup is all about tangible results, so there is no equity value in the idea alone. Amount of venture funding provided.

Cofounder 261

Cofounder Stock Founder Technical Cofounder 261

The Next Web

NOVEMBER 20, 2013

There are a lot of variables to go into calculating a fair equity split a startup team. So, a fair split, would be closer to 60/40 in favor of the funding founder, when diluted for the cash. You need to collectively take all four paragraphs into consideration, in calculating a fair equity split between the founders.

Cofounder 136

Cofounder Equity Founder Seed Stage 136

The Next Web

JUNE 15, 2012

From Silicon Valley to Peoria, Illinois, cash-strapped startups look for inventive way to finance their business – often handing out equity to employees, consultants, vendors, and other service providers. Pitfalls in sharing equity. While equity can be a great tool for compensating early on, the drawbacks are significant.

Equity 116

Equity Stock Options Vesting Stock 116

Startup Professionals Musings

APRIL 23, 2012

One of the first tough decisions that startup founders have to make is how to allocate or split the equity among co-founders. Another common “failure to start” situation I see is one where the “idea person” insists that the idea is 90% of the value (and 90% of the equity). The same logic applies to splitting equity with co-founders.

Intellectual Property 252

Intellectual Property Equity Cofounder CTO Hire 252

thinkspace.com

SEPTEMBER 7, 2012

How to Divide Equity to Startup Founders, Advisors, and Employees. The part that I’d like to zero in on is when you’ve got a high growth company what are some of the best practices out there to distribute equity to the founders, advisors, and employees? Equity for Founders. Equity for Employees. Bookkeeper.

Equity 62

Equity Employee Founder CTO Hire 62

Gust

APRIL 11, 2014

Let’s get right down to business: Dilution of founders’ and other early shareholders’ equity in startups is frequently a subject of intense interest and debate. That’s the concept of what some call mathematical dilution. That is not economic dilution, but rather its opposite ( accretion ).

Dilution 162

Dilution Equity Pre-Money Valuation Prospectus 162

www.avc.com

SEPTEMBER 22, 2011

Employee Equity: How Much? The most common comment in this long and complicated MBA Mondays series on Employee Equity is the question of how much equity should you grant when you make a hire. And the amount of equity you need to grant to accomplish these hires is also an art and most certainly not a science.

Equity 64

Equity Employee CTO Hire Fractional CTO 64

Startup Professionals Musings

SEPTEMBER 25, 2019

It never hurts to ask in a job interview what stock options are available, and don’t fall for the offer which promises to “work out the equity terms later.” Any offers of equity compensation before the first round of institutional capital should be considered purely speculative. Advisory Board Member, 1% Senior Engineer,3 -.7%

Equity 237

Equity Stock Options Advisory Board Stock 237

The Startup Magazine

MARCH 14, 2022

The equity dilution at this nascent stage is on desirable terms; such investing can lead to profitable returns. Equity listing offers an opportunity for investors from cities to own a part of the company. At this stage, the founder mainly raises funding from their sources or family and friends. 2) Seed funding.

Technical Review 144

Technical Review Due Diligence India Startup 144

The Next Web

OCTOBER 7, 2013

Quite frankly, waiting provides more assurance around employment risk without the commensurate sacrifice in equity comp. Every time a startup raises capital, all common shareholders are diluted. In a CTO Salary and Equity trends report by Safire Partners, it finds non-founder equity compensation to settle out below 2 percent.

Engineer 129

Engineer Dilution Option Pool Vesting 129

David Teten

DECEMBER 2, 2019

And of course, effectively all venture capitalists are going to require some equity for their investment. I’m now researching non-dilutive funding for Action Tank , a startup I’m gestating to “Make America Functional Again”. I emphasize my focus here is organizations which are backing for-profit companies and do not take equity.

Technical Review 60

Technical Review SBIR Dilution Silicon Valley 60

ReadWriteStart

JUNE 1, 2020

Forms of funding. ? Equity investment. Equity investment is the most popular and most talked-about avenue for startup funding. These investments are made instead of shares or equity in your startup. Equity investors. The third source of funding is from equity investors. Stages of Equity-based funding. ?

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

Startup Professionals Musings

SEPTEMBER 27, 2023

This is called stock dilution control. While new equity owners always have to get it from someone, actual re-allocation of existing shares should be based on a formula to maximize the value of your remaining founder shares. Minimize your own loss of ownership as major investors contribute.

Stock 240

Stock .Net Vesting Founder Vesting 240

View from Seed

DECEMBER 4, 2014

Editor’s note: Understanding how to divide founder equity at a startup can be tricky, even to the point of reaching emotional riffs between founders. Below, Lee Hower offers advice for approaching these equity discussions objectively and properly. Sometimes co-founders put off the equity split question for some time.

Equity 315

Equity Founder Sweat Equity Cofounder 315

Gust

OCTOBER 18, 2014

What this investor is seeking is called “permanent, full-ratchet, anti-dilution protection”, and that is neither (a) in line with the market, nor (b) practical. That’s why anti-dilution provisions are typically only applicable to the next financing. So, no , you simply can’t give him what he wants.

Dilution 137

Dilution Ratchet Equity Finance 137

Both Sides of the Table

AUGUST 14, 2017

Boards are not appointed to be founder-friendly lapdogs for the 1–3 founders who start companies and usually own the largest equity positions in the company. To be clear — most founders I’ve ever worked with have been super ethical, very conscientious, not overly greedy and take their personal responsibilities very seriously.

Cofounder 217

Cofounder Stock Options Equity Technical Review 217

YoungUpstarts

SEPTEMBER 23, 2017

Deciding whether to increase money or trade equity in the business for much needed assistance, could be a tough call. I raised money and traded equity, but with my venture, I had to make one of the toughest decisions, to build it with some assistance of co-founders. Both the choices tend to take away a few options. Plan, Plan and Plan.

Cofounder 109

Cofounder Sweat Equity Equity Dilution 109

David Teten

JANUARY 19, 2021

From traditional equity VC, Flexible VC borrows the option to pursue and reap the rewards of an outsized exit. Flexible VC 101: Equity Meets Revenue Share. Equity Ownership. Yes, typically preferred equity. On average, founders own just 43% of equity by Series B , declining thereafter. Flexible VC 102: Variations.

Cofounder 78

Cofounder Technical Review Equity Dividend 78

Agile VC

DECEMBER 4, 2014

As a result, one of the trickier things co-founders tackle is determining the equity split amongst the founding group of individuals. Across both the startups I’ve personally been involved in (PayPal and LinkedIn) and the startups in which I’ve been an investor, I’ve seen a broad range of co-founder equity splits.

Cofounder 255

Cofounder Equity Founder Sweat Equity 255

Startup Professionals Musings

OCTOBER 7, 2022

Ancillary objectives, like retiring existing debt, buying a building or paying salaries to people with equity ownership will not get traction. How much equity ownership are you willing to offer? Most professional investors will expect preferred stock, a board seat, rights to later rounds and perhaps anti-dilution protection.

Preferred Stock 304

Preferred Stock Exit Strategy Equity Angel Investor 304

Startup Professionals Musings

JANUARY 15, 2021

This is called stock dilution control. While new equity owners always have to get it from someone, actual re-allocation of existing shares should be based on a formula to maximize the value of your remaining founder shares. Minimize your own loss of ownership as major investors contribute.

Vesting 298

Vesting Dilution Stock Founder Vesting 298

Feld Thoughts

SEPTEMBER 2, 2011

Equity is split 55% and 45%, but where is that officially recorded? The benefit of hiring Praveena is they think they could keep more equity and control of the company. But, Praveena hails from the land of big paychecks and is not ready to leave that without considerable equity. Time to update the cap table.

Cap Table 133

Cap Table CTO Hire Technical Cofounder Cofounder 133

Startup Professionals Musings

NOVEMBER 8, 2021

This usually means not taking money from equity investors, since investors want fast growth, high profits, and an exit event, to allow investments to be recouped. Non-equity funding has to come from personal sources, or government grants, or bank loans. Corporate versus personal growth really becomes a lifestyle decision.

Entrepreneur 371

Entrepreneur Equity Dilution LLC 371

www.inc.com

SEPTEMBER 24, 2011

Should You Share Equity with Consultants? To grow his cash-strapped start-up, Parker ended up sharing equity -- not only with employees, but also with consultants and vendors. Parker found that equity as compensation helped build loyalty to his company -- even among consultants. But sharing equity can have pitfalls, too.

Fractional CTO 40

Fractional CTO Equity Iowa Technical Cofounder 40

Berkonomics

DECEMBER 31, 2020

The company was funded entirely by grants from the National Institute of Health, amounting to millions of non-dilutive dollars in all. No dilution to shareholders or the founders. The post Financing with grants, not equity or debt first appeared on BERKONOMICS. How refreshing! How grants are considered. Other sources of grants.

Equity 62

Equity Finance Dilution Founder 62

Both Sides of the Table

MAY 28, 2018

It’s true that some later-stage private equity firms like to fund “roll ups” (a company that acquires many related companies in it sector), but this is seldom the domain of VCs. Every VC knows that the amount you raise is often a proxy for your valuation.

Burn Rate 247

Burn Rate Valuation Pre-Money Valuation Dilution 247

Startup Professionals Musings

JULY 1, 2022

It never hurts to ask in a job interview what stock options are available, and don’t fall for the offer which promises to “work out the equity terms later.” Any offers of equity compensation before the first round of institutional capital should be considered purely speculative. Advisory Board Member, 1% Senior Engineer,3 -.7%

Stock Options 343

Stock Options Advisory Board Stock Startup 343

VC Adventure

AUGUST 16, 2020

Yet others try to use cash to minimize dilution for early employees and try to rapidly reduce their reliance on options. Both of those things are not good for your business, so while it’s ok to offer some level of cash/equity trade-off, it shouldn’t be over-done. But better to have a view on this that is deliberate.

Programming 149

Programming Vesting Equity Software Review 149

Both Sides of the Table

FEBRUARY 6, 2013

it’s the most expensive dilution you’ll ever face. But not anal if one founder who shares equity graciously with early employees who are treated as “co-founders” My idea startup team is heaving on tech personnel but also has strong product management. Quick summary: Be careful not to have too many co-founders.

Cofounder 388

Cofounder Early Stage Startup Silicon Valley 388

David Teten

AUGUST 19, 2019

This structure offers some of the benefits of traditional equity VC, without some of the negatives of equity VC. I’ve been a traditional equity VC for 8 years, and I’m now researching new business models in venture capital. Benefits: Non-dilutive, flexible credit offerings that fit SMB or enterprise SaaS.

Revenue 60

Revenue Technical Review Software Review Equity 60

discuss.joelonsoftware.com

NOVEMBER 1, 2010

where I can learn about how to build a sweat equity team? Rather, it is a proposal for sweat-equity investors. Mark Walsen Mark Walsen Thursday, October 09, 2008 Deleting … Approving … I think you would be better off hiring people, rather than trying to convince them to work for free in exchange for equity.

Sweat Equity 40

Sweat Equity Equity Angel Investor Affiliate 40

View from Seed

APRIL 30, 2015

Glen Mello: Venture debt is a good complement to equity. It’s generally got a lower cost compared to equity capital and can help support growth. So it makes it a lot more challenging when you have debt on the books that isn’t as longer term as equity. NVV: Is there any dilution? What are some pros and cons?

Term Sheet 120

Term Sheet Equity Startup Seed Stage 120

This is going to be BIG.

JANUARY 18, 2024

On the other hand, they could be the opposite—much more focused on near-term cash distributions than long-term equity appreciation. They might have a more flexible time horizon than a VC because the money doesn’t come from a fund with a limited lifespan.

.Net 88

.Net Cap Table Startup Technical Review 88

ithacaVC

OCTOBER 10, 2017

Here is the big problem with investors – they dilute the founders’ ownership in the company. Let’s cover some basics: It is impossible to issue stock to investors without existing shareholders (founders, employees and prior investors) being diluted. Is this actually a big problem? Are the founders happy?

Dilution 53

Dilution Stock Options Stock Valuation 53