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How much dilution should I expect per financing round?

Looking to do a seed round and raise between $500K and $1M. I have been doing some research as to what kind of dilution I should be expecting with the new round coming in and other subsequent rounds that I may need to raise to fuel the growth of the venture. Is there a specific rule of thumb that I should follow here as frame of reference? Thanks a lot for the input folks!

6 Replies

Abhishek Krishna
2
0
14 yrs+ Business Planning Expert/ Corporate Finance / M&A
Hi...its safe to offer between 7-15% equity at initial stage since the investor is putting their risk capital and would expect this. Pls keep in mind at this stage the venture is perceived most risky and you to have get the investor buy in through some good negotiation skills. If you have traction/ revenue generated already then this figure may be lower by 3-5%.
Nedko Nedkov
1
0
Nedko Nedkov Entrepreneur
Brandvertisor: Free Ads Management for Startups
To be more realistic is first step :)
Nowadays accelerators accept startups that has built product working MVP, beta from A to Z & traction which is initial paying clients, thousands of subscribers, users who are actively visiting the website/app whatever.
You need to have some community & publicity authority as well.
And of course CONFIDENCE which comes from experience and success results already, not after funding..

At least that's my 2 cents from last 8 months spent on applying to accelerators, talking to VCs, graduated pre-accelerator.. in Europe.
Make sure to make your results visible - clients, case studies, finished beta MVP etc. process flows..

Good Luck with funding, but you will get access to funds when you already do not need it to develop the project, but when you need to scale it.. that is what usually happens :)
Rod Abbamonte
0
0
Rod Abbamonte Advisor
Co Founder at STARTREK / @startupHunter / @startupWay / @CoFounderFound / @GOcapital / @startupClub / @lastminute
Keep 20% for investors and manage this participation throughout the investment rounds.
Neil Gordon
2
0
Neil Gordon Advisor
Board Member, Corporate Finance Advisor and Strategy Consultant
Founders worry about percentages. Investors worry about return on investment.

Better to forget rules of thumb and think instead about what your company is worth. Take a hint from the way corporate finance works in public companies, where (as they used to say) the value of the company is printed in the paper every day. Percentage ownership is the dependent variable!
Abhishek Krishna
0
0
14 yrs+ Business Planning Expert/ Corporate Finance / M&A
It also depends on Valuation of the company if the Return on eqiuity or Internal Rate of Return is high for rhe investor then the stoxk dilution may be lower
. RISK Iis inversely proportional to RETURN. I have generally seen investors asking for up to 15% for new ventures. Founders should not dilute more than this anyway if they wish to raise more funds in follow up rounds and if especially if they wish to offer ESOPs too
Harald Steindl
1
0
Harald Steindl Advisor
Mastermind at HST Consulting - Raising The Bar
As always its a matter of negotiation. If you need money (and why else would you want to seed a financing round?!) you offer something and want to acchieve a price for it,right?
IMHO almost every single startup over estimates their valuation because the all make the same mistake:
You value your company for xx millions but the clue is you do need external money to realize it. So your current valuation is actually not xx mio but just a fraction of it or zero if you cannot manage to be afloat anymore.
So, as Neil said: What kind of deal can you give your investors?
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