I'm working on a funding deal with a friendly angel. But they're asking for a lot of equity, to be treated almost as a founder. They're a valuable person to help get a big idea off the ground, but the terms being asked for are not commercial. The turning point seems to be this: in the funding process, when should the founders lose majority ownership of the common stock? Seed, Series A, Series B, etc? Any thoughts on what is commercially reasonable?
Having done over 35 different financing rounds over 7 companies I've built in Silicon Valley - you should be giving up 15%-25% dilution in each round with a plan to never raise beyond a Series-C.
Investors get equity for money invested, don't start doing "special deals" or it could poison the well for future investors. If you want to "slightly" sweeten it for a truly early investor , then put them on your advisory board for 1/4 a point equity ( vesting over 2 years). Then they have to deliver some value for that equity.
-MD
Answered 10 years ago
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