Most investors go for equity in the projects they invest in, a lot of founders are quick to give out stakes in their project to get the needed funding. But what is the maximum equity stake for founders to release to investors?
They are: 10% pre-seed, 10-20% both seed and series a. Or a combination of equity and tokens (with a particular vesting period) if investments are chased in a crypto project.
Generally, any founder has to answer a question of what degree of control he/she wants to preserve in the enterprise. If he/she is ok with 50% of it, he/she can do it. If he/she is ok with letting go of 90% of it – this can be done too. However, to be in charge, or at least to be at the helm of a given company, the largest fraction of equity should be in the hands of a founder. Giving up on control for the sake of funding is not always a good strategy, since it may result in a long-term loss of ownership, or at least a voice.
It’s worthwhile if the business owner decides in advance how much control he/she wants to have in their hands, and only after that take an action. Each step in the business world has to be carefully pre-planned and calculated – otherwise, there’s a risk the enterprise will not follow the intended pathway.
by Christopher Fowler
March, 01st, 2020
March, 20th, 2020