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How Much Equity Do VCs Really Get?

In challenging economic times like this many folk are tempted to break out of their personal economic straight jackets by launching a technology startup. ‘Capital-light’ startups are the rage today, thanks to the extremely low costs of hosted services and the plethora of open source infrastructure software solutions. Many newbie entrepreneurs look to venture capital as the best way to finance the launch and development of their business. A common question raised by many of these entrepreneurs is ‘how much equity do VCs typically get?” Thanks to the folks at OwnYourVenture.com, entrepreneurs can now use a web based tool to model the impact of multiple rounds of venture capital funding. This post explores not only the math behind how founders’ equity gets diluted by venture capital, but it also models what founders’ ultimate payoffs can be in various exit scenarios. One pof the key takeaways is that you should worry more about how much VCs will own at the end of the fund raising process and what your exit will look like versus how much equity you give away in your Seed or Series A round.


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Money machine
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manrev2
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ManRev1
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