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In order to be competitive, a company needs to have just about everything in place, from its product to its team to market traction, before it is ready to seek funding. Your private profile is where investors will look with a critical eye on everything that makes you a business rather than just a product or a sexy idea.
As the seed-stage startup fundraise process has received more transparency in recent years, ranging from published advice on how to raise seedcapital to increased availability through AngelList, Funders Club, and various accelerator programs, I’ve noticed another trend emerging.
Finance Friday’s gets off the ground with today’s post by introducing you to an imaginary startup, the entrepreneurs that we’ll being following throughout the series, and their first challenges: splitting up the founders’ equity and addressing the case where one of the founders provides the initial seedcapital for the business.
Assuming equity is raised at or above that cap, the total dilution, before the new money, is 16.6% (equivalent to an equity financing of $1m at a $6m post moneyvaluation. The company spends the $1m building and launching their first product. The product gets a lot better. ” They are running out of money.
Because time is often the most precious resource for seed funds, it is increasingly important to make every investment more “impactful” in the case of success. This means greater focus on ownership, pre-moneyvaluations, and dollars in.
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