How much equity should you give up to the investors?
Friends & Family Round: Less than 10% most often in the 5-6%
Angel Round: It’s 20-25%
VC Series A Round: 25% to 30%
It’s important to keep the founders motivated so if too much equity goes to investors, there’s little incentive for the founders to keep going.
As a startup, you want to see value from the investors in addition to funding.
Typically, family and friends can only help a little.
The startup can also use a convertible note which is a debt instrument that converts to equity later. This delays the valuation discussion until the startup has built products, closed customers, and the values in the business are more clearly defined.
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Hall T. Martin is the Director of Investor Connect which is 501c3 non-profit dedicated to the education of investors for early stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.