Continuing with yesterday’s post on Budgeting for the $300k Seed Round, let’s now look at the equity side of the startup. Some of the biggest components of equity include founder shares, employee shares (restricted stock or stock options), investor shares, and advisor shares. On the investor side, that’s driven by how much money was raised and at what valuation.
Here’s an example equity structure pre seed round (50/50 split is the easiest but not usually the best way to go):
- Founder 1 – 50%
- Founder 2 – 50%
Now, let’s assume the startup raises $300k at a $1.2 million pre-money valuation, and thus sells 20% of the business ($300k of the $1.5 million post-money valuation is 20%). Add in an employee stock option plan and some advisor shares and we have the pieces ready to model it out:
- Founder 1 – 32%
- Founder 2 – 32%
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