Q: How do I go from seed funding to series A funding if I already gave away 49% of my company in the seed funding?
There’s no question giving away 49% of your seed round will be a bit of a flag for Series A investors.
But it’s not the end of the world.
- First, even if you sell another 20% of your company in the Series A, that still leaves 30% for the founders and employees. Not great, but plenty for everyone to make a lot of money.
- Second, if the cap table is problematic, it can be restructured. If it’s too much work, some VCs may balk. But they’ll typically just put whatever restructuring needs to be done in their term sheet.
- Third, selling 50% of the company before Series A is not as uncommon as you think, especially where there are > 1 seed rounds. These days, startups often do 2–3 seed rounds, sometimes even more if they issue lots of SAFEs and notes. So this isn’t so uncommon anymore.
- So … just let VCs know early. Just let them know you sold a lot in the seed round. It’s not the first time.
It’s not a gating item to getting funded. It just may add a little more work to get it closed.