founders dilution

FOUNDERS' DILUTION

SHARES DILUTION FOR FOUNDERS

It’s important to plan ahead and have your exit strategy clear from the start. What do you want to do with your life and your company? And how much of it should you give to investors in order to see new equity flowing into the business, propelling you towards the next stage of expansion? In short: which are the best strategies to avoid shares dilution for founders?

One of the many important aspects of raising capital is keeping control over your board and on the life of the company, and while there are many nuances in place (especially regarding the nature of investors’ preferred shares) one main aspect is to keep the majority of shareholding voting rights.

EXIT HERE?

So, if you are preparing to raise your first round you should probably think about how this is going to affect the next ones. Am I giving in too early? Should I push my performance to get a higher valuation and leave less on the table?

cap table and preferred shares distribution

Also, in the same file, you will be able to run different scenarios in regards to the different typologies of preferred shares that investors may ask you. And see what that means in terms of dividends in a flat or down round. 

Generally, a good investor can slingshot you into a realm you wouldn’t be able to access with just your energies. And probably it’s worth paying a premium for that… But the decision is only yours at the end of the day, and you may need to run a few scenarios to make up your mind.

Download our Cap Table and Founders’ Dilution model, and run these scenarios for you and your co-founders. It may help you make up your mind on the route to follow!

founders dilution

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