The article explores the impact of equity dilution on early-stage startups and offers advice for making sound fundraising decisions. It emphasizes the importance of raising only the necessary amount of capital to protect ownership. Early funding is costly, and founders should be cautious about giving away too much of their company. It is crucial to forecast and understand the long-term implications of funding instruments such as convertible notes and SAFEs. The article also highlights the significance of setting caps to protect against dilution in future rounds and being mindful of the size of the employee equity pool. Founders should be cautious about super pro-rata arrangements with investors, as they may deter future investors. Overall, founders are encouraged to understand the terms, do the math, and use available tools to make informed decisions while acting quickly to attract the right investors and build a successful startup.
Startup Equity Dilution By Lewis Hower
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