In a seed funding round, how can you limit the equity that you give away? I know that it is a debt which will convert to equity. I want to be careful that I don’t give away more than a certain percentage of my equity in the angel round when the valuation of the Series A is finalized.
Questions
Limit the equity that I give away in Angel round
2 answers from the community
A· Apr 1, 2015
Find an internet equity dilution calculator and use it.
The amount you "give" away is a function of the valuation. Whether you go convertible or not, the pre-money valuation vs. the amount raised - with the influence of an option pool - is what determine how much you "give" away.
The pre-money is a negotiated amount - either what your investors accept for valuation in the case of straight equity, or a top line value in the case of convertible debt.
A generic rule of thumb is $2M - that's roughly the average seed level pre-money valuation. For more specific data, you'll need to befriend a bankster to see what segment specific pre-money valuations look like - they aren't standard by any means.
A· Apr 3, 2015
To answer your question directly - limiting dilution requires you to either raise less or get valued more. So ask yourself what you can do to achieve either. Killer team, great story, amazing results? Valuation. None of the above? Get to bootstrapping or say goodbye to a chunk of your company.