Startup Funding Espresso - Dilution by Startup Stage

Episode notes

Dilution by Startup Stage Hello, this is Hall T. Martin with the Startup Funding Espresso - your daily shot of startup funding and investing. Dilution is a major issue for founders. Each stage of fundraising causes another reduction in the founder's ownership. Here are the levels of dilution at each startup stage based on current data: Seed round - 20% Series A round - 20% Series B round - 17% Series C round - 13% Series D - 11% Series E - 10% In the early days of the startup, the founder gives up 20 to 25% of the equity to investors. As the rounds continue, the amount of dilution decreases. By the Series C round, the dilution drops below 15%. In the early days, some founders may have given up 25% or more. It's clear they are giving up more equity than other startups. To reduce dilution, consider the following: Map out the rounds of funding for the life of the startup and factor dilution into the plan. Run a what-if cap table analysis to determine the impact of dilution on the founder's ownership. This will inform the founder on what valuation must be achieved at each stage.

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