There is no appropriate formula, but bear in mind different VCs have their own different formulas. It’s hard to tell from the outside, but VCs will often pass on an investment if you don’t meet their formula.

What are these formulas?

  • Most Seed funds want to own at least 5%-7%. Think funds in the $20m-$50m range.
  • Most Late Seed funds want to own 7%-12.5%. That’s my sweet spot, ideally more.
  • Most Series A and Series B funds want to own 15%-20%. Think $150m-$200m+ Series A funds that write $8m-$10m checks, and $300m-$1b+ Series B funds that write $15m-$30m checks.
  • To each of these, add “or often more” in 2018. Funds have gotten bigger, times are good, we’re 10 years into a bull run. Everyone wants to take more risk to make more money.

The real lesson is realize if you go out to raise “too little” in terms of ownership, you can get a lot of No’s and not quite understand why.

So just ask.

If you want to only sell a very small % of your company, usually, don’t work with VCs. Find others.

I went through this myself. As EchoSign crossed about $6m in ARR, we were cash flow positive, but I wanted to raise an extra $2m-$3m extra. We had $2m in the bank but I wanted a bit more. I couldn’t get it from VCs. I could get $10m, $15m, maybe even $20m. But not $2m. I didn’t get Why at the time. Now I do. The price I asked was fair (I offered a discount for the smaller check size). But the ownership to the VCs was just too small.

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