Founders - is $250K worth 3% of your company?
How about $1 million? Would you part with 11% of your company for that cash?
When fundraising on SAFEs, the conversation often centers around the valuation cap. I think framing the deals around ownership makes more sense.
It's the same math, of course. If you raise $500,000 on a post-money SAFE with a $10 million cap, you've sold 5% of your company.
It may not feel that way, as the cash hits the bank account now and the equity doesn't convert until you raise a priced round in the future.
But the math is just the math. And with many founders raising 2 or 3 or even 4 rounds on SAFEs, tracking the dilution to your ownership is perhaps even more important than watching your valuation cap rise.
So - how much are founders selling today in these SAFE rounds?
Chart below: start on the left side. The median startup raising less than $250K (what we'd call a friends and family or angel round) sell 3% of the company.
75% of startups raising this amount sell 9% or less of the company. Make sense, $250K is not a lot of cash in the grand scheme of startup world.
The other tiers look like this:
$𝟮𝟱𝟬𝗸-$𝟰𝟵𝟵𝗞
founders sell about 7% of the company
Distribution still focused on the lower percentages
$𝟱𝟬𝟬𝗞-$𝟵𝟵𝟵𝗞
11% sold or so
The most variation in the range. So highly dependent on the kind of founder, their experience, and the type of investor (have you moved beyond angels to real pre-seed funds here?)
$𝟭𝗠-$𝟮.𝟰𝗠
16.4% median equity sold
Kind of a seed round but also slightly small
$𝟮.𝟱𝗠-$𝟱𝗠
21.4% sold on a median basis
Very similar to the 20% we see for priced seed rounds
To be clear - there isn't a right answer here. Different founders will have different views on the utility of the cash and investors will vary in their willingness to take a lower ownership stake. It's all a negotiation.
But hopefully these figures give you a place to begin that discussion. And don't be afraid of a good ole' priced equity round!
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