How much equity should I sell?

A question we get a lot - Carta came out with some good data around dilution across rounds and changes over time. Here's how I think about it.

“How much to part with at each venture stage”

Is a question we get a lot across funding rounds. While the high level / generic answer fairly straightforward, the devil is often in the details.

Generally:

• For pre-seed to Series A, assume to sell ~ 20% of your company per round from pre-seed to Series A, no matter the valuation. And make sure not to sell more than 25% of the company in a single round.

• For Series B and beyond, assume to sell ~15% or less (the later the round, the less dilution you typically take)

These ballpark figures are supported by the data from Carta below:

• The 25th percentile for seed rounds sells ~15%, the median is 20.6% and the 75th percentile sells ~24%.

• For Series As, the spread is slightly wider where the 25th percentile sells ~13%, the median is 20.1% and the 75th percentile sells ~27%.

That said, every startup’s situation is unique, every funding round is different, some startups require more capital vs others. etc.

The most important thing is to get a round done and properly capitalize the business to 1/ stay alive and 2/ continue growing from there. Followed by having investors in the mix you enjoy working with as well as having clean terms as messy ones set the precedent for downstream investors, are hard to course correct, and can have a huge impact on outcomes (e.g. significant liquidation preferences).

Dilution matters too yet as long as you’re roughly within the 25th to 75th percentile, I wouldn’t worry about it nearly as much.

Here’s what the Carta numbers say about dilution per funding round.

Interesting observations when looking at the data include:

• Dilution for all rounds went down from 2020 to 2023

• For Seed and Series A, dilution continued to go down / stay the same from 2022 to 2023, indicating the continued competitiveness in the funding markets

• For Series B and beyond, dilution increased indicating a shift towards a more investor friendly market.

Until next week,

Pascal

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