Founders - would you sell 30% of your company in your pre-seed round? Hint: that's a pretty steep deal!
Typically startup founders in 2025 will start their fundraising journey on SAFEs (Simple Agreement for Future Equity). More than 90% of angel / pre-seed rounds we see on Carta go this route, so get familiar with the terms!
But dilution from SAFEs can be a bit abstract to many founders, because they get money in the door today but the actual equity changes hands at the first priced round — which may be 6 months or 2 years away, who knows.
Data below shows the current benchmarks we see for dilution in a SAFE round (assuming the conversion happens at the post-money valuation cap).
𝗣𝗼𝗶𝗻𝘁𝘀 𝘁𝗼 𝗥𝗲𝗺𝗲𝗺𝗯𝗲𝗿
1. As you raise more capital, dilution typically increases. This dynamic levels off around $3M or so (which is a standard seed round size). Seed investors usually get about 20% of the business.
2. The ranges on each cash raised tier are SUPER wide. Some founders will see 6% of the company for a million bucks, some will sell 16%. It's highly dependent on how "in demand" that startup happens to be. More investors want in = better terms for the founder.
3. Don't over dilute if you can avoid it — but also don't kill your business to save some hypothetical dilution. Obviously based on the data 30% sold in a pre-seed round is a LOT but if it's the only way to keep the business afloat, go for it.
(...but damn that's a lot).
4. Angels don't usually do side letters, but pre-seed and seed investors do. So optimizing only for valuation, and not taking into account all the deal terms, can be...suboptimal. Read the docs closely and get a good lawyer!
5. Some founders build SAFE rounds with lots of little tranches (so earlier investors get say a $8M val cap, then some get a $9M val cap, then it goes up to $10M, etc). This can work, but it can also backfire on founders who overestimate the demand for their companies. Be careful out there.
Share with a fundraising founder - we're in prime raising season right now 🙏
#startups #founders #SAFEs #preseed #fundraising
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