How Much Equity Should You Sell in Each Round? A Founder’s Guide to Equity and Dilution

Raising Capital Without Losing Control: A Founder’s Guide to Equity and Dilution

Raising capital is a balancing act: you need enough funding to grow, but you also need to protect your ownership so you don’t find yourself squeezed out of your own company. Many founders raise money without fully understanding dilution, only to realize too late that they’ve given away too much too soon.

This guide covers:

1. What is dilution and how to approach it
2. How much equity to sell in each round.
3. Why founding team ownership declines over time.
4. Why selling too much early can hurt founders.
5. How to calculate ownership with post-money SAFEs and avoid unexpected dilution.
6. How to fix your cap table if founders own too little equity.

By understanding these key factors, you can raise capital strategically without losing control of your company.

Dilution is Like a Pizza—Don’t Give Away Too Many Slices

Think of your cap table as a pizza.

At the start, you own the whole pizza—every slice belongs to you. As you raise money, you start giving slices away:

• Investors take slices in exchange for capital.
• Employees get slices as equity compensation.
• Advisors and consultants might take a small slice too.

If you’re not careful, you’ll end up with too few slices for yourself. Some founders give away too much too soon and find themselves with no pizza left—despite having built the company.

The key is to only give slices to those who help grow the pie. If raising capital and hiring the right people increases the size of your pizza (i.e., the company’s value), then giving away slices is worthwhile. But if you give away too much early, you’ll struggle to keep control as the company scales.

How Much Equity Should You Sell in Each Round?

A reasonable target for equity sold at each funding stage is:

• Pre-Seed: 10-15%
• Seed: 15-20%
• Series A: 15-20%
• Series B and beyond: 10-15% per round

After Series A, a strong founding team usually retains at least 60% ownership, and founders typically lose majority ownership only after Series B. However, we see a trend of founding teams decreasing their ownership more rapidly due to larger pre-seed and seed rounds (see below).

Why Founding Team Ownership Declines Over Time (Including 2025 Trends)

The data shows that founding team ownership steadily declines as startups progress through funding rounds. Why?

1. Early Convertible Instruments: Many companies raise substantial pre-seed capital via SAFEs or convertible notes. These instruments convert into equity at the first priced round, leading to dilution.
2. Bridge Rounds & Extensions: Given the tough fundraising climate in 2023 and 2024, many startups had to raise bridge rounds, extension capital, or a combination of both. These rounds often come with additional dilution, particularly if they involve new investor protections or discounts.

‍Why Selling Too Much Early Hurts You

1. Founders End Up With Too Little Equity

Many founders don’t realize how dilution compounds over time. Selling too much in early rounds leaves you with little ownership by the time the company becomes valuable.

For example, if you raise a large pre-seed round at a low valuation, followed by a heavily diluted seed round, you might enter Series A with only 30-40% ownership left. Investors may hesitate to back a company where founders are not sufficiently incentivized to stick around.

2. The Company Might Be Forced to Do a Recap

If a startup is too diluted too early, new investors may refuse to invest unless a recapitalization (recap) happens. A recap restructures the ownership, typically by diluting existing investors and re-allocating equity to attract new capital.

How to Calculate Ownership with Post-Money SAFEs

Many founders miscalculate dilution when raising on post-money SAFEs. Unlike pre-money SAFEs, which dilute existing shareholders and investors together, post-money SAFEs only dilute existing shareholders—meaning founders often get diluted more than they expect.

Example Calculation of SAFE Dilution

Let’s say you raise $1M on a $10M post-money SAFE cap.

• The post-money valuation is $10M, meaning the SAFE investors will own $1M / $10M = 10% of the company.
• If you and your co-founder previously owned 100%, after the SAFE conversion, your ownership will be reduced by 10%, leaving you with 90% pre-Series A.

However, if you raise multiple SAFEs at different times, these dilute sequentially, which can stack up quickly. Founders often raise multiple SAFE rounds before Series A and are surprised when their ownership is much lower than expected.

Understanding Your Implied Discount When Raising a Priced Round

One of the biggest risks with low SAFE valuation caps is that when you raise your next priced round, early SAFE investors may get an unintended steep discount.

For example:

• At pre-seed, you raised $500K on a $1.5M post-money SAFE cap.
• Now, you’re raising a priced seed round at a $17M pre-money valuation.
• Your early SAFE investors effectively paid a $1.5M valuation instead of $17M, meaning they received a 91.2% discount on the seed round valuation.

How to Avoid Unexpected Dilution with SAFEs

• Model different dilution scenarios before signing SAFE agreements.
• Raise only what you need to get to the next milestone, rather than stacking multiple SAFEs (volatile industries like web3/crypto might be an exception because you want to ensure you have a buffer for bear markets).
• Consider valuation carefully—low valuation caps mean higher dilution.

How to Fix a Cap Table When Founders Own Too Little Equity

If you find yourself over-diluted, there are two key ways to fix your cap table:

1. Renegotiate the SAFEs’ valuation caps as part of the priced round closing condition.
   • If the low SAFE valuations result in massive discounts (over 50%), consider amending them so the discount is capped at 20-50%.
2. Issue additional shares to the founders.
   • Reserve extra shares in the option pool of the next financing round and allocate them to founders.

These approaches can help rebalance the ownership structure without requiring drastic changes to the company’s capital structure.

Final Takeaways

✅ Be strategic with dilution—aim to sell no more than 20% per round.

✅ Strive to retain at least 60% ownership after Series A and lose majority ownership only after Series B.

✅ Be mindful of team equity allocations—give fairly, but don’t over-give.

✅ Understand post-money SAFEs and model dilution before signing.

Your Cap Table is Your Pizza—Don’t Give Away All the Slices

Think carefully about who gets a piece of your pizza. Make sure that every slice given away is going to someone who will help grow the entire pie. If you sell too much too soon, you’ll find yourself left with crumbs.

Fundraising is about more than just raising money—it’s about keeping control. Being intentional about how much equity you sell will set you up for long-term success.

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Also, don’t forget to grab our Free Equity Issuance Checklist to ensure legal compliance when granting equity.

By getting equity right from the start, you can keep your cap table clean, and avoid major headaches down the road. 🚀