

Ask HN: Founders, how much equity did you give up in your first funding round? - DonPellegrino

How much equity did you give up in your first funding round? How much seed money did you get in return? How functional was your product at that stage? I&#x27;m expecting answers to be all over the place, but that&#x27;s fine. A link to your startup&#x27;s website would be great.<p>Thank you,<p>A young and curious entrepreneur.
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beat
Have you read "What Every Angel Investor Wants You to Know", by Brian Cohen
and John Kador? Great book. It should give you a lot more insight into funding
than just getting numbers from HN.

Basically, respectable angels don't want to control your company, so they
aren't going to take too large a percentage - 25% or less. They want to invest
in you, not own you.

From there, figure out how much you think you're going to need for 12-18
months runway, and you can compute the pre-money valuation you'll need as 3-5x
that. Then you convince angels to give you the amount you need at the
valuation you want (and they want you to have). If you don't have enough
product or enough potential or enough hope to justify the valuation, they can
just go to one of the other hundred startups clamoring for their money.

So don't worry about valuations or what others have done. Worry about how
you're going to impress the hell out of the angels so they can't wait to
invest in you. If you can wow them, you'll get what you need. If you can't,
they'll pass you over. Simple as that.

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Sealy
I'm also curious. From the digging I've done. A lot of the numbers can be seen
on CrunchBase.com from the TechCrunch guys. They will rarely share the
percentage equity given away though. I'm guessing this is something founders
want to keep a secret!

... and for a some interesting reading, check out:
[http://whoownsfacebook.com](http://whoownsfacebook.com)

~~~
malandrew
A lot of the time this is done to keep secret any strategic investors in a
company.

Some very large companies will plop some money down just for the sake of
starting a relationship with a company so that they could monitor that company
to make an acquisition offer when the time is right. Sometimes the founders
want to keep certain investors secret because it may scare off investments or
acquisition offers from the competitors of the strategic investor. If you are
a founder you should definitely deny board observer rights and financial
observation rights to such investors. They can work against you as a de facto
poison pill.

Another option is that there are "gatekeeper" investors involved that used to
work very high up in some large public tech company. They discover a new
company that may be of interest to their former employer. They make a nominal
investment in the company and then make a ton of money back by simply making
the right introductions and pushing the deal through. While this conflict of
interest may be known to many of those involved, they may not want their
investments to be openly public since it would shed light on the conflict of
interest.

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tyrchen
As a first time entrepreneur, I raised about $25k for seed round, paying 10%
(5% for the money, 5% for a 4-month service) of my equity to the incubator.
Then after 4 months I raised half million USD for angel round, paying 20% of
my equity. BTW, I'm in Beijing, China.

This is just a reference. It could vary greatly based on the background of
your team, the maturity of your product, etc.

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bossologist
My first funding round, of my first company was entirely mistake ridden. I
will share my experience though as an example of what not to do.

The company that I had started basically thrived on who you knew in terms of
manufacturing and processing in a given area. The larger the manufacturer the
larger the paycheck, no up front cost to the company, only back end at time of
payment.

Basically I had two business owners approach me with a rolodex of large
manufacturers, any of which would net a larger amount of revenue than my
entire previous year of pavement pounding that I did on my own. I "sold" 50%
of my company to these two in hopes that we would all have the same passion
and drive that I had (I was a college student so money was a big deal.)

As you have already assumed, they wanted nothing to do with the operations or
effort involved, or even introductions to these manufacturers, only profits
which came from my efforts.

Long story short, 49% should be the limit no matter what since I was unable to
rid my company of the leeches and ended up selling my share to them, just to
get out.

