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Chris Dixon provided some commentary on Twitter that he believes I missed “the most important point about fund size.&# He’s specifically referring to his point of view that entrepreneurs shouldn’t take seedmoney from “big VC’s&# (he defines them as > $100 million). Great reputation.
It wasnt because they werent accredited investors that I didntask my parents for seedmoney, though. When we were starting Viaweb,I didnt know about the concept of an accredited investor, anddidnt stop to think about the value of investors connections.The reason I didnt take money from my parents was that I didntwant them to lose it.
A company raises $1m of seedmoney from angels in a convertible note with a $6m cap. 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 money valuation. Here’s the scenario.
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