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How does equity dilution work for startups?

Gust

Equity dilution works when the same pie is divided among more people. Uncategorized company equity dilution founder investors startup

Understanding How Dilution Affects You at a Startup

Both Sides of the Table

Dilution. million pre-money valuation, which is a $10 million post-money) you get diluted by 25% (2.5m / 10m). million at a $7.5 million.

Dilution concerns by founders and investors

Taffy Williams

Investors and co-workers in your startup often express dilution concerns. What is the dollar value of your ownership in the company?

Maker's Mark Dabbles in Diluting Its Brand

Fresh Inc.: The Staff Blog

In fact, the distillery has seen an increasingly difficult time in keeping up with expanding sales. Too much demand, actually.

18 Scarcity Examples That Can Boost Sales

ConversionXL

The problem is, if you don’t do it right, it’s pretty meaningless (or worse, you trigger a psychological backfiring and hurt sales). Amazon.com.

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Stick to What You Know: How Branching Out Can Hurt Your Business

Up and Running

Don’t Dilute Your Brand. Case in point: did you know that without even being aware of it, you can unintentionally weaken and dilute your brand? Of course, Virgin is still around and kicking; they are simply too large to be ruined by this sort of brand dilution. These are exaggerations, of course (I certainly hope).

The Resetting of the Startup Industry

Both Sides of the Table

Optimize for a W more than % dilution in these circumstances. Founders hate them because they’re dilutive. Why does this matter?

Valuations 101: The Venture Capital Method

Gust

The concept is simply…since: Return on Investment (ROI) = Terminal (or Harvest) Value ÷ Post-money Valuation. (in the case of one investment round, no subsequent investment and therefore no dilution). Reduce the pre-money valuation (above) by the estimated level of dilution from later investors. OK…let’s split the difference. million.

Should You Sell on Etsy, or Build Your Own E-commerce Site?

Up and Running

As long as you’re not spreading your energy too thin or diluting your traffic, the more exposure you can get, the better. Selling on Etsy.

SEO 30

Stick to What You Know: How Branching Our Can Hurt Your Business

Up and Running

Don’t Dilute Your Brand. Case in point: did you know that without even being aware of it, you can unintentionally weaken and dilute your brand? Of course, Virgin is still around and kicking; they are simply too large to be ruined by this sort of brand dilution. These are exaggerations, of course (I certainly hope).

8 Ways To Maximize The Value Of Your Startup Stock

Startup Professionals Musings

Make sure the government waits for a stock sale to collect taxes. This is called stock dilution control. In the U.S.,

Stock 83

Smart Entrepreneurs Build Startups Without Investors

Startup Professionals Musings

Don’t let early funding increase risk and dilute your potential. Outside funding is not a startup entitlement.

7 Investor Term Sheet Demands Startups Need Not Fear

Startup Professionals Musings

Terms to prevent equity dilution relative to others. Still, no one wants the terms to be so complex that the deal never closes.

Anatomy of a Term Sheet: Right of First Refusal, Right of Co-Sale and Lock-Up

VC Ready Blog

While the Investor Rights Agreement deals with the rights of the investors vis-à-vis the company, the Right of First Refusal and Co-Sale Agreement gives the company and the investors certain rights vis-à-vis the company’s common stockholders. Right of Co-Sale. Right of First Refusal. Lock-Up.

One of the Biggest Mistakes Enterprise Startups Make

Both Sides of the Table

And of course the most successful technology companies: Google, Facebook, Salesforce.com [duh], Oracle, Microsoft all have loads of sales people.

Happy Birthday HubSpot! 9 Lessons From Our First 9 Years

OnStartups

Don't minimize dilution, maximize impact. Pick a great partner, get fair terms and don't sweat the dilution too much. Get used to it.

7 Keys To Making A Micro-Business Your Success Path

Startup Professionals Musings

These are usually characterized as owner-operated, with five employees or less, and less than $250,000 in sales. Do you love antiquing? Fishing?

Too Many Bells and Whistles Will Not Sell a Product

Startup Professionals Musings

Avoid adding features for a single customer to close a sale. Early adopters, who love to count features, are not your major market.

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How to Configure Your Startup Team

Both Sides of the Table

it’s the most expensive dilution you’ll ever face. Don’t hire “relationship management” sales people too early.

Deciding How Much Equity to Give - How Much is Less Important Than What It's Worth!

Small Business Force

It is also less understood than it should be, with dilution and control issues being major points of concern. Your 80% is now worth $5.6

How much capital should you raise?

Version One Ventures

Raise too much and you’re diluting your ownership; raise too little and your company will have trouble gaining traction or making it to the next month.

How To Stretch Your Comfort Zone For Business Success

Startup Professionals Musings

Lack of focus only confuses customers and dilutes your scarce time and resources. The idea is the only easy part.

How to Avoid Taking “Dumb Money” in Your Startup

Up and Running

Every time an investment is made, everyone dilutes!). See Also The 10 Questions I Didn’t Expect To Be Asked By Investors.

Valuation vs Ownership

A VC : Venture Capital and Technology

The entrepreneur suffers the same dilution but gets $3mm more to work with. The first deal would produce $20mm in proceeds at sale, an $18mm gain, and a $3.6mm carry if you charge 20% as we do at USV. And at the time of the sale to Yahoo!, he owned a very nice stake in the business even though he had raised well north of $100mm.

Why Companies Fail

Seth Levine's VC Adventure

Not recognizing that your sales problem is actually a product problem. Companies in the venture business fail all the time. Premature scaling.

How To Segment Your Subscribers When You Run A Blog Business

Entrepreneurs-Journey.com by Yaro Starak

Sometimes you just want to make sure as many people read your content as possible with no sales message, where at other times you want to make as many sales as possible , but not turn away readers who don’t want to buy. Ideally we want to maximize both audience retention and growth , and maximize profit too.

Why Startup Founders Happily Give Up 90 Percent Of Their Companies

Fresh Inc.: The Staff Blog

Most aren''t concerned that dilution will mean giving up control. At the seed round, an investor may take a big chunk. (We''ve heard up to 50%, though that varies from deal to deal.) As founders raise more funds, their share gets diluted--meaning the percentage of the company they own gets smaller and smaller. million so far. billion

Founder’s Stock Is Gold, If You Know The Rules

Startup Professionals Musings

Stock dilution control. Everyone wants to minimize dilution of shares, so this special clause is common. Vesting with no cliff.

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10 Tough Quandaries That Lead Entrepreneurs Astray

Startup Professionals Musings

The downside is loss of control and financial dilution. The dilemma is that these goals are usually mutually exclusive. Marty Zwilling.

What Is Venture Debt and How Should Startups Use It?

View from Seed

NVV: Is there any dilution? There’s been a lot of digital ink spilled around the various types of capital available to startups today.

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Why You Need to Ring the Freaking Cash Register

Both Sides of the Table

And the dilution that goes with it. I see this weekly. The I work with a lot of startups. Nobody seems to want to make money any more. million.

Value Inflection Points for Seed-Stage Startups

View from Seed

Similarly, proving sales friction can sometimes be done with very little actual product built. Get a working version of the product.

How Valuable Are Stock Options Offered By A Startup?

Startup Professionals Musings

CEO brought in to replace the founder, 5 - 10% CTO, CFO, VP of Marketing or Sales, 1.5 - 3% Chief Engineer or Architect, 1 - 1.5%

What to expect before accepting the offer to become Engineer #1 at a startup

The Next Web

Every time a startup raises capital, all common shareholders are diluted. “It kinda sucks to be engineer #1.”. Engineer #1?

An Inside Scoop on the Funding Environment and What it Might Mean for You

Both Sides of the Table

forward sales with some as high as 12x sales. $30 million. That’s how much Invoca raised and we’re announcing it today.

8 Questions to Help Decide if You Should be Raising Money Now

Both Sides of the Table

How much dilution am I going to have to take now? So if you can take 27% dilution for $1.5 25% dilution). They get the PR bump.

The Truth About Convertible Debt at Startups and The Hidden Terms You Didn’t Understand

Both Sides of the Table

In a standard VC term sheet there is a standard term called an “anti dilution provision” and they are in nearly 100% of deals.

10 Branding Elements And What They Mean

Brandanew

Its existing premium customers won’t take it kindly as it dilutes the said image. Branding is complex topic. Brand identity. Brand image.

How to Make Sure Professional Services Don’t Take Over Your Software Company

Both Sides of the Table

So when I meet with GRP portfolio companies that do enterprise sales I try to emphasize the following: 1. training. rollout support. Whatever.

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3 Simple Rules for Headache-Proof Customer Service

Fresh Inc.: The Staff Blog

care little about our sales numbers if we are doing the very best we can to service people. How does this make you feel? hope not.