Q: How much equity do you give up in Series A?
Of course, this isn’t always the case. And there are Series A investments of all different shapes and sizes these days.
But here’s what you can assume:
- Most larger VC firms ($250m-$2b fund size) want to own 20% of each investment. They’ll even often pay a higher price to get that ownership, if need be.
- Your existing investors will want to do some or all of their pro rata, especially if a good Series A investor comes in. Their “pro rata” will often equal about another 5%.
So 25% … 20% for the Series A investor, and 5% to existing investors … is sort of the base state. It’s how “traditional” venture capital works.
You don’t have to do it this way. And you can, to an extent, negotiate these numbers down a bit, even with traditional investors. And you can find non-traditional investors and others less sensitive to ownership percentages.
But assume, as a rough rule, most investors will want to buy 20%, and that means selling 25% all-in as a “base case”.
Some related data here:
Published on June 26, 2020