Avoid Giving Up Too Much Equity in the Early Stages

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

In the early stages of a company, fundraisers should focus on the minimum amount, not the maximum.

The valuation is low, and so the founders encounter greater dilution.

The majority of the fundraise should be done later when the valuation has increased.

Each round will cost the founder 25% of their equity.

Most use convertible notes.

Beware of using the convertible note as a credit card in which the founder keeps raising funds on it.

At the Series A level, venture capital will check to see if there's enough equity left for their investment.

The VC will also want to see enough equity left in the round for the founders.

If the founders have given up too much equity in the early stages, then investors will not fund the startup.

Founders should keep track of the equity they are giving up with convertible notes.

They should have at least 60% of the equity by the time they approach a Series A investor.

Consider these points in negotiating early-stage rounds of funding.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let's go startup something today.

_________________________________________________________

For more episodes from Investor Connect, please visit the site at: http://investorconnect.org

Check out our other podcasts here: https://investorconnect.org/
For Investors check out: https://tencapital.group/investor-landing/
For Startups check out: https://tencapital.group/company-landing/
For eGuides check out: https://tencapital.group/education/
For upcoming Events, check out https://tencapital.group/events/

For Feedback please contact info@tencapital.group

Please follow, share, and leave a review.

Music courtesy of Bensound.