Equity Pre and Post $300k Seed Round

Continuing with yesterday’s post on Budgeting for the $300k Seed Round, let’s now look at the equity side of the startup. Some of the biggest components of equity include founder shares, employee shares (restricted stock or stock options), investor shares, and advisor shares. On the investor side, that’s driven by how much money was raised and at what valuation.

Here’s an example equity structure pre seed round (50/50 split is the easiest but not usually the best way to go):

  • Founder 1 – 50%
  • Founder 2 – 50%

Now, let’s assume the startup raises $300k at a $1.2 million pre-money valuation, and thus sells 20% of the business ($300k of the $1.5 million post-money valuation is 20%). Add in an employee stock option plan and some advisor shares and we have the pieces ready to model it out:

  • Founder 1 – 32%
  • Founder 2 – 32%
  • Investors – 20%
  • Employee Option Plan – 15%
  • Advisors – 1%

Notice the option pool equity was taken out of the founders’ equity. Another way to do it is to put in the employee option pool after the funding so that it dilutes the founders and the investors (this is less common). On the financing side, each round of funding will typically dilute everyone that doesn’t participate pro-rata an additional 20 – 30%.

What else? What are your thoughts on this example equity structure pre and post seed financing?

One thought on “Equity Pre and Post $300k Seed Round

  1. Its extremely typical but where people freak out is when they actually see the stock purchase agreement and they can’t make the share number and share price add up since the option plan isn’t actually allocated stock. People can understand what you did above but to really help those who’ve never done it before it would be cool to take it all the way to what ends up in the SPA.

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