Founder Dilution

A VC : Venture Capital and Technology

I’ve written a bunch on this topic and here are two posts that address this exact issue: Founder Dilution – How Much Is “Normal”? Employee Equity: Dilution. I saw a blog post this weekend that looked at the IPO filings of 79 tech companies and calculated the ownerships of the founders and the VCs at IPO. The result of that analysis is that the average founder ownership at IPO was 17% and the average VC ownership at IPO was 56%.

How does equity dilution work for startups?

Gust

Equity dilution works when the same pie is divided among more people. Because the total percentage of equity will always equal exactly 100%, every time anyone gets another piece, by definition it “dilutes” all of the previous equity holders.

Brisbourne: The Math Behind Anti-Dilution (With Examples)

Ask The VC

Today’s post of the day is from Nic Brisbourne (DFJ Esprit) and it titled What is anti-dilution/downround protection? Nic covers narrow-based, broad-based, and full ratchet anti-dilution with real examples using real math. Fundraising anti-dilution brisbourne broad-based anti-dilution full ratchet fundraising narrow-based anti-dilution vc post of the dayWell – I fell off that particular horse.

Dilution and Investors and Tension

ithacaVC

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. It is impossible to do a stock for stock business combination without existing shareholders being diluted. But now the diluted shareholders own a smaller piece of a larger pie hopefully.

Dilution concerns by founders and investors

Taffy Williams

Investors and co-workers in your startup often express dilution concerns. This piece further addresses the issue of dilution as a result of an excellent question from a reader commenting on a recent article covering the summary of a conference.

Should I give my seed investors anti-dilution protection?

Gust

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. Even if you were willing to give it to him, it is highly, highly unlikely to stand up beyond the next financing round, because there’s no way your next investor is going to take a dilution hit for this first one.

Mathematical vs. Economic Dilution of Startup Equity: Thinner Slices of an Extra-Large Pizza

Gust

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.

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). But understanding how you’re likely to get diluted over time is a more difficult concept. So here is our crack at explaining the world of dilution to you.

Early Employee Dilution

ithacaVC

But here is one that I want to focus on in this post: “Can I ask for undiluted stock (non dilution clause)?” I am not even sure what “undiluted stock” is, but safe to say the person (I will call him Exec X) meant stock that his equity would not be dilutable in terms of ownership. It is legally possible to grant non-dilution via a contractual right. Those additional grants would prevent Exec X from being diluted.

Co-founder dilution

StartupCFO

When entrepreneurs talk about dilution to their share ownership, most of the time they’re talking about dilution from outside investors. Yet, more dilution, especially early on, can come from adding co-founders which is something no one seems to talk about. I am in favour of having a co-founder. It gives you someone to bounce ideas off, energize you when you’re down, etc. Investors generally like them too.

Maker's Mark Dabbles in Diluting Its Brand

Inc Startups

But now there's a new wave of comments, this time from customers angry that the company would dilute the product they have come to expect. The bourbon distillery offers a perfect case study in how to anger your biggest fans: Take the product they love and water it down--literally.

Legal Basics: Fully-Diluted Capital

VC Ready Blog

When discussing a company’s capital structure, investors typically talk in terms of “fully-diluted capital” (a/k/a capitalization on a “fully-diluted basis”), rather than authorized or issued capital , because fully-diluted capital provides a more accurate picture of the company’s overall capitalization. There are two other important things to note about the way fully-diluted capital is calculated.

Founder Dilution Survey

Will Price

Sim over at Polaris Ventures is looking for founders to help him quantify dilution over the life of a company (financings, stock option refreshes, etc) and the impact of fund raising on the ultimate stakes founders enjoy in their companies. He will be sharing his findings on his blog. Take the survey here

The Dilution Concern for Founders

Recent Buzzes - VC Experts, Inc.

There are three phenomena that trivialize even the best of investment strategies: Dilution, Dilution, Dilution.". The problem is, of course, dilution. Dilution - Dilution - Dilution. By Joseph W.

Anti-Dilution Provisions - An Example

Recent Buzzes - VC Experts, Inc.

Anti-Dilution provisions can be a key negotiating point when it comes to the Deal Terms of a new round of financing, especially in the presence of a. View an example of Anti-Dilution Provisions By VC Experts Analyst Team. Down Round. Broad Based Weighted Average can be a more friendly provision as compared to. Full Ratchet when it comes to the effects of equity % held by early investors and founders. See how these terms can differ when it comes to the structure of the.

Dilution and Investment - An Answer You May Not Expect

Taffy Williams

The companies with low prices either had to dilute investors in a financing, had enough to survive, or went out of business. So when you consider the Dilution Effects of a financing, remember the following advice delivered by many old timers; “ It is Better to Have 10% of a Lot of Money, than Have 100% of Nothing.” You don’t want to dilute the investors too much, but you want enough funds to ensure you can weather any storm and that you will not run out of money.

Reminder: Entrepreneurs, use OwnYourVenture, an equity simulator to overcome your dilution fears or questions in no time!

Grade A Entrepreneurs

For most entrepreneurs, it’s hard to get funded, and then, when they receive a term-sheet, at the same time they are thrilled, they worry (for good or bad reasons) about dilution, often terrified at the idea that they might have been ripped off.

Anti-Dilution Provisions - An Example

Recent Buzzes - VC Experts, Inc.

Anti-Dilution provisions can be a key negotiating point when it comes to the Deal Terms of a new round of financing, especially in the presence of a. Down Round

The Dilution Concern for Founders

Recent Buzzes - VC Experts, Inc.

There are three phenomena that trivialize even the best of investment strategies: Dilution, Dilution, Dilution.". If my students at Cornell University take away one thought from the entire semester of instruction, that thought is embedded in the following exposition: First, I draw on the blackboard an inverted bell shaped curve, the top of the curve heading downwards rather than up.

Anatomy of a Term Sheet: Conversion and Anti-dilution

VC Ready Blog

Anti-dilution Provisions. While the timing of conversion is not a very hot topic in negotiating a term sheet, the anti-dilution provision can be if the investors decide to play hardball. Other adjustments, however, are intended to protect the investor against dilution caused when the company issues shares at an effective price-per-share lower than the price-per-share paid by the investors (a future financing at a lower price is called a “down-round”).

Anatomy of a Term Sheet: Conversion and Anti-dilution

VC Ready Blog

Anti-dilution Provisions. While the timing of conversion is not a very hot topic in negotiating a term sheet, the anti-dilution provision can be if the investors decide to play hardball. Other adjustments, however, are intended to protect the investor against dilution caused when the company issues shares at an effective price-per-share lower than the price-per-share paid by the investors (a future financing at a lower price is called a “down-round”).

Is Dilution Considered When Talking About Equity Ranges?

Ask The VC

Your Business Grew, Your Brand Got Diluted, Here's How To Avoid It

Inc Startups

Do you even know the voice and tone of your company's communications these days? Maybe it's time to have a 2nd look

Strategy Roundtable For Entrepreneurs: Non-dilutive Financing Through Revenue Sharing

ReadWriteStart

I have discussed at length why revenue sharing channel deals may serve as perfectly fine alternatives to raising equity (or even complements) because of their non-dilutive nature.

The fine line between dilution and delusion

BeyondVC

I can also say that there is a similarly fine line between dilution and delusion but this one is easier to draw. So if faced with this situation, my only word of advice for entrepreneurs is that it is important to know that there is a fine line between dilution and delusion. The post The fine line between dilution and delusion appeared first on BeyondVC.

Finland's Tekes Re-Launches Tempo With 75% Non-Dilutive Funding

ArcticStartup

In 2011, Tekes Tempo launched with an idea to provide 50% non-dilutive funding to companies that would be building market-oriented services.

Republican lawmakers dilute Democratic governor's powers

Winston-Salem Journal State/Region News

AP) — Republican legislators have for a second time voted to dilute the power of North Carolina's new Democratic governor to run elections RALEIGH, N.C. (AP)

8 Great Reasons to Bootstrap Your Startup

Early Growth Financial Services

Bootstrapping helps you to focus on your product in so much as … Continue reading → Financial Planning bootstrapping dilution enterpreneurship entrepreneurs equity fundraise profit margins self-fund small business financial planning startup startup financials vc venture capitalOriginally published in SoCalTech. To self-fund or to raise funds? That’s the big question that many founders ask themselves as they try to get their product and service to market.

7 Best Strategies for Maintaining Equity

Early Growth Financial Services

Whether you’re funded, seeking funding, or still bootstrapping, here are some of the best strategies for avoiding dilution and maintaining maximum equity: 1. Doing so will prevent unnecessary dilution and it allows you to get the highest possible value for each round. Of utmost concern to many entrepreneurs is how to retain maximum equity in their startups. Rightly so. It’s a constant balancing act: growing your company without losing control of it.

How much money should I raise?

Venture Hacks

Just try to maintain control, monitor your liquidation preference, and monitor your dilution. Take your pick: disaster vs. dilution. Tags: Dilution Future Financings We get this question all the time and there’s no right answer. So I started a discussion on Quora to learn more. Here’s my answer : Raise less if you want to keep your valuation down and keep the option open for an early exit where everyone (investors, employees and founders) makes money.

Walker Twitter Highlights: March 25th – April 7th

Scott Edward Walker

“Be careful not to have too many co-founders; it’s the most expensive dilution you’ll ever face.” Twitter Highlights co-founders dilution quora seed seed finance startup startup ideas startups I’m using Twitter as a form of micro-blogging to share interesting blog posts, articles and podcasts relating to entrepreneurship and startups, M&A and legal issues. Below are my five most popular tweets (via bit.ly ) for the past two weeks.

RSS 46

"But the reason I’m a valuation hawk isn’t just that I’m a cheapskate (though I."

Mark Birch

investing startups seed round angel investing valuation dilution “ But the reason I’m a valuation hawk isn’t just that I’m a cheapskate (though I most certainly am a cheapskate). It’s that valuation is the universal lever for mitigating the risk of investing in startups. I care about four things when I invest: People, Product, Market/Traction, and the Deal. The problem is, in early-stage investing, there’s a lot of uncertainty associated with the first three terms. ” - by Chris Yeh.

Size of Pie, a.k.a. What Type of Entrepreneur Are You?

OnlyOnce

Although David is talking about taking in outside capital and founder dilution in pursuit of larger business growth and objectives, he is also getting to the same point about entrepreneur type. Business Entrepreneurship Venture Capitalists dilution entrepreneur equity Founders scalingSize of Pie, a.k.a. What Type of Entrepreneur Are You? Mmmm…pie.

The Most Common Way Entrepreneurs Kill Their Business

Nick O'Neill

Entrepreneurship DilutionThe ruler of the world is always a master at one thing: ruling the world. Businesses are the same way: they exist to satisfy specific needs of their customers.

Should I Use My Investor’s Lawyer?

Scott Edward Walker

For example, he will explain to you how the liquidation preference works and run spreadsheets, if necessary, to show you how much money you will receive based on different sale scenarios; he will explain to you how the option pool works, including the founders’ significant dilution; and he will discuss what protective provisions are and other tricky legal terms, such as drag-along rights and anti-dilution provisions.

What Are the Rights of Minority Stockholders?

Scott Edward Walker

Startup Issues anti-dilution provisions controlling stockholders conversion rights derivative claim fiduciary duty inspection rights liquidation preferences minority stockholders oppression proper purpose redemption rights

5 Podcasts to Eliminate Negative Self-Talk

Inc Startups

Getting other voices into the mix can dilute the negativity and add motivation. Talking to yourself isn't a bad thing -- but the fact that up to 70 percent of your words are negative is a very bad thing.

Angels - Keep It Simple and Fair

Ask The VC

Acknowledging The Value of Coaching and Therapy for Founders

Feld Thoughts

First, Felicis Ventures is committing 1% on top of every check the firm writes in non-dilutive capital earmarked for “founder development” in coaching and mental health. I’ve long written about the stigma around entrepreneurship and depression / other “mental health-related issues.” ” I was delighted to see two articles in the last day about others addressing this.

Convertible and SAFE Notes

A VC : Venture Capital and Technology

Here is why: They defer the issue of valuation and, more importantly, dilution, until a later date. I think dilution is way too important of an issue to defer, for even a second. They obfuscate the amount of dilution the founder(s) is taking. Sometimes we get blamed for leading such a dilutive round, but I don’t care so much about that, I care about the fact that we are allowing these young companies to finance themselves in a way that allows such a thing to happen.

The 3 Rules of Successful Business as Taught By Seth Godin (and Your Mother)

Inc Startups

In a world desensitized and diluted by incessant noise, has standing out from the crowdbecome a privilege preserved for the select few

How Much Money To Raise

A VC : Venture Capital and Technology

It's too dilutive to you and your co-founders and angels. First, try to dilute in the 10-20% band whenever you raise money. You might have to do more, but try hard to keep your dilution below 20% each round. Image via Wikipedia.

This Is How Successful Brands Reach More Ideal Customers

YFS Magazine

Before you think about diluting your brand offering or price in order to serve everyone and anyone, here are five strategies you can use to attract the right customers.