Startups · Entrepreneurship

How much dilution should I take on a Seed round?

Uzair Usman Partner at Usman Group | Independent Business Consultant

September 21st, 2016

In the process of raising a Seed round of funding. Any guidance on the

amount of dilution that I should expect and what are also market accepted terms?
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Donavon Urfalian A.I. Engineer / Entrepreneur / Founder & CEO @ Umazed / Kodo Startups

September 21st, 2016

It depends. Actually, in my experience, 20-25% is the norm. Here is a typical example. X VC company evaluates or values your company at 8 million pre. Pre meaning before they give you money in exchange for equity/shares/preferred stalk, they value you it based on their research. Then let's say they give you 2 million in exchange for equity/shares, then out of thin air, your company issues them those shares. So Post evaluation your company is worth 10 million. Basic math. 8 pre 10 post 2 million in seed funding, in this example you give up 20% equity in exchange for 2 million. That's as basic as an explanation as it gets. There is an option pool, but you can argue to keep it between 10-15% if you or a team member is going to be the CEO/CTO or C level.

Shams Juma

September 21st, 2016

20 - 35% is generally the range of dilution per round of funding.

Zhenya Rozinskiy Partner at Mirigos

September 21st, 2016

One choice you may have is to do the seed round using either convertible notes or SAFE and not worry about dilution until later 

Tom Duffy

September 21st, 2016

i believe that the first step is to see what the market  size of the company the money needed to get to the next level and put together a plan 

Mike Moyer

September 21st, 2016

Don't put a valuation on your company unless you're raising enough money to meet all your expenses in the foreseeable future.

Smaller amounts of money should be raised using convertible notes/SAFEs as mentioned above.

For early participants, use the Slicing Pie equity model.