How can you determine the right amount of equity to offer investors?

Consider investor value-add - Strategic investors providing expertise may merit higher equity compared to only financial capital. Show investors the growth trajectory and demonstrate why reasonable equity terms now will pay off for all with higher future valuations. Understand dilution implications - Model dilution at each funding stage so it doesn't exceed acceptable levels.

There is a saying that is better to hold 10% of $1,000,000 company then 100% of a $0 company. This is partly true to the fact that sometimes it is OK to settle for a lower valuation in order to get funding and if you do that, there are other ways you can still keep control or protect yourself from future dilution. Those methods include anti dilution protection (for the founder!), classes of shares (such as a class with limited or no voting right), veto rights and more.

Truly understanding the ACHIEVABLE total addressable market, and working backwards as to the value each investor will provide towards reaching maximum reasonable penetration.

Valuate your own company with a mix of conviction and realism and transmit that to your investor. Valuation lies in the middle of buyer and seller (of the company), convincing the other (with correct argument) to find the perfect sweet spot

The matchup is an agreeable realistic return by both operator & funder. Any profits above can be split the same OR larger portion to operator if he is taking the sole risk of a loss or lesser than expected return.

1) Pre-Seed Stage: - Very high risk, no history or traction to assess - Investors betting on team, vision and early KPIs - Need to offer higher equity, 15-25% to attract first investors 2) Seed Stage: - Aim for 10-20% equity split with seed investors - More data to determine projections and valuation - Slightly less risky after demonstrating initial product-market fit 3) Series A Stage: - Target 5-15% equity for Series A investors - Revenue and user metrics can be assessed - Proof of concept and business model reduces risk 4) Series B and beyond: - Growth, not survival, is now the priority - Aim for less than 10% equity per funding round - Established product and financials means lower risk

Investors aren't just looking at spreadsheets; they're investing in you as an entrepreneur and your team. In the pre-seed or seed stage, where uncertainty and risk are high, investors are not just betting on your idea but also on your passion and dedication. You might need to offer a higher equity stake, to attract investors who believe in your vision & trust your ability to execute it. As your business matures, you've likely de-risked to some extent. But the human element remains crucial. Investors want to see a capable team that can scale the company. They will value your team's experience & execution capabilities. If they share your values & vision may accept a lower equity stake in exchange for a partnership built on trust & alignment.

In my experience, 'it depends on what investment you're looking at'. I am skilled in analyzing market reactions to determine the overall market ROI vs the actual. Real life information is always the best type, in this profession. #realestate #appraiser #broker

Spend more time evaluating the "who" than the "how much". It is critical to know the motivations of your equity investors - when they join you, it is the best of times, but be sure to consider what behaviour you expect to see in the difficult times. Some are more patient than others. Some are true partners.

Other than capital, what else can your investors contribute? Product distribution? Cost synergies? Access to intellectual property? These may catalyse your business plan and propel enterprise value

Choosing the type of investors is critical to each stage of funds’ raising - this is in addition to what has already been shared over here.

It's paramount to remember that investors often bring more than just capital. Whether it's industry connections, expertise, or market access, consider the holistic value an investor brings to the table. In some cases, it might justify a slightly higher equity offering.

Additional Considerations: Strategic Alignment: Seek investors aligned with your vision and industry expertise. Track Record: Prioritize investors with a successful startup track record. Founder Control: Balance equity with decision-making power. Vesting and Milestones: Tie equity to goals for mutual commitment. Reputation: Check investor credibility and references. Exit Strategy: Ensure alignment on future exit plans. Communication: Foster trust and chemistry for a productive partnership. Dilution: Anticipate equity changes in future funding rounds. Professional Advice: Consult legal and financial experts. Flexibility: Seek adaptable investors to navigate changing circumstances. Always think of Divorce before the marriage with an investor!