FinelystHow Much Equity to Give Up in a Seed Round
How much equity to give up in a seed round: the rules of thumb, a method to work out your number and worked examples of dilution across future rounds.
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A commonly cited rule of thumb is that a seed round sells somewhere around 10% to 25% of the company, but that range is orientation, not a target, and it varies by market. The right number is the smallest stake that buys enough money to reach the milestones your next round depends on, at a valuation the market will accept. Work it out from the bottom up: milestones, then the amount, then the valuation, and remember to include the option pool in your calculation.
This article focuses on the decision itself. For the underlying arithmetic, see pre-money vs post-money valuation.
Why there is no single right answer
The percentage you sell is the result of two numbers: how much you raise and the post-money valuation.
Ownership sold = Investment ÷ Post-money valuation
You can only influence the valuation so far. It depends on your traction, team, market, competition between investors and the general funding environment. The amount, on the other hand, is mostly your decision. That makes the amount the main lever, which is why you should start there.
A method to find your number
Step 1: Define the milestones
What must be true by the time you raise again, or by the time you no longer need to? Make the milestones concrete and measurable:
- A product release with specific features customers have asked for
- A revenue or usage level, plus evidence of retention
- One or two key hires in place
- A repeatable acquisition channel with known costs
Step 2: Cost the plan
Build a monthly budget that gets you to those milestones. Add a buffer, because plans slip. A common habit is to add several months of runway beyond the plan so you are not fundraising with the clock running out.
Step 3: Estimate a realistic valuation range
Talk to founders who raised recently in your market and stage, and ask investors directly what they see. Treat what you hear as anecdotes, not benchmarks. Use a low, middle and high case.
Step 4: Calculate the dilution in each case
Example: you need €900,000 to reach your milestones with a buffer.
| Pre-money valuation | Post-money | Investor ownership |
|---|---|---|
| €2.7M | €3.6M | 25.0% |
| €3.6M | €4.5M | 20.0% |
| €5.1M | €6.0M | 15.0% |
You can check any of these combinations with the post-money valuation calculator.
Step 5: Add the option pool
If the investor wants a 10% pool in the post-money capitalisation, created before the round, the founders lose that 10% on top. In the middle case above, founders would go from 100% to 100% − 20% − 10% = 70%, not 80%.
Step 6: Look further ahead
One round tells you little. What matters is where you will be after the rounds you expect to raise. That is the next section.
Modelling dilution across rounds
Assume two founders with 50% each, and a path of seed, Series A and Series B. Each round sells 20% to new investors, and before each round the option pool is set to 10% of the post-money company. For simplicity, assume no options have been granted yet, so the existing pool counts towards the 10% target. The numbers are purely illustrative.
| After round | Founders combined | Option pool | Seed investors | Series A | Series B |
|---|---|---|---|---|---|
| Start | 100% | 0% | – | – | – |
| Seed (20% + 10% pool) | 70.0% | 10.0% | 20.0% | – | – |
| Series A (20%, pool kept at 10%) | ~54.4% | 10.0% | ~15.6% | 20.0% | – |
| Series B (20%, pool kept at 10%) | ~42.3% | 10.0% | ~12.1% | ~15.6% | 20.0% |
Real cap tables are messier: once options are granted to employees, the pool has to be refilled, which costs the founders more. The pattern is still clear. Three rounds of 20% plus pool top-ups can leave two founders with well under half of the company together, and if the seed round had sold 30% instead, every line below it would shift down too.
Try different paths in the funding dilution calculator. It lets you enter up to three rounds, each with its own pre-money valuation, investment and option pool target, and shows the ownership table after each one.
When it can make sense to give up more
Selling a larger stake is not always a mistake.
- The milestones are expensive. Hardware, regulated industries and deep technology often need more capital before evidence appears.
- The investor brings something hard to replace. Distribution, regulatory knowledge or a key partnership can be worth extra dilution, if it is concrete and not just a promise.
- The alternative is running out of money. A slightly worse round now is usually better than a desperate round later.
When to give up less
- You already have strong traction and several interested investors. Competition between investors is the most reliable way to improve terms.
- You can reach the milestones with less money. Smaller rounds from angels, revenue or grants may bridge the gap.
- You expect to raise several more rounds. Leaving room on the cap table keeps founders motivated and the company attractive to later investors.
Alternatives and complements to a larger round
| Option | How it reduces dilution | Trade-off |
|---|---|---|
| Raise in tranches | Second tranche released when a milestone is hit | Risk that the milestone is missed |
| Convertible instruments with a cap | Defers the valuation discussion | Dilution is hidden until conversion |
| Revenue-based financing | Repaid from revenue, no equity | Needs predictable revenue |
| Grants and public programmes | No equity at all | Application effort, restrictions on use |
| Customer prepayments | Funds growth from customers | Only works with strong demand |
The startup fundraising guide explains how these fit together with a priced seed round.
How to talk about equity with investors
Investors often anchor on the ownership they want rather than on the valuation. A seed fund may aim for a certain percentage in every company it backs, because that is what makes its portfolio maths work. Knowing this helps you negotiate.
- Lead with the plan, not the percentage. Explain the milestones and the amount needed to reach them. That frames the discussion around what the money achieves.
- Ask what ownership they target. It is a fair question and the answer tells you whether the amount and valuation you have in mind are realistic for that investor.
- Adjust the round size, not just the price. If an investor wants more ownership than you would like to give, a slightly larger round at the same valuation, or a smaller lead cheque with angels filling the rest, can bridge the gap.
- Discuss the option pool explicitly. Agree on the hiring plan that the pool should cover, so the pool is sized for real needs rather than as a hidden valuation adjustment.
- Get every offer in comparable terms. Convert each one into post-round founder ownership before you decide.
Common mistakes
Picking a percentage first. "We will not sell more than 15%" sounds disciplined, but if 15% at the achievable valuation does not fund the milestones, you will be back fundraising too soon.
Forgetting the option pool. A 20% round with a 10% pool created pre-money costs the founders 30%.
Ignoring convertibles. Earlier SAFEs or notes that convert in the seed round add to the dilution. Read SAFE vs convertible note to see how conversion works.
Chasing the highest valuation at any cost. A valuation you cannot grow into can make the next round flat or down, which usually brings tougher terms and morale problems.
Not looking at founder splits. If the founders' stakes are very uneven, dilution can push one founder's share low enough to affect motivation. Revisit your co-founder equity split and vesting before raising.
Checklist before you agree to a number
- Milestones for the round are written down and costed
- Amount includes a buffer for delays
- Low, middle and high valuation cases calculated
- Option pool size and timing included in the dilution
- Outstanding convertibles modelled at conversion
- Two or three future rounds simulated
- Founder ownership after each round reviewed together by all founders
- Term sheet reviewed by a lawyer in your jurisdiction
This article is general information, not investment, legal or tax advice. Startup financing terms and the legal steps for issuing shares differ by country, so get professional advice before you commit.
FAQ
What percentage of equity do founders usually give up at seed?
There is no fixed number. A rule of thumb often discussed among founders and investors is somewhere in the range of 10% to 25% per round, but the right figure depends on how much you need, your traction, your market and the funding climate.
Is it bad to give up more than 25% in one round?
Not automatically, but it leaves less room for later rounds and can make the cap table look unattractive to future investors. If you are close to that level, check whether a smaller round or a staged raise would reach the same milestones.
Should I raise less to keep more equity?
Only if the smaller amount still gets you to the milestones that make the next round or profitability possible. Running out of money before you hit them usually costs far more ownership than raising a little more up front.
Does the option pool count towards the equity I give up?
In practice yes. If the investor asks for a new or larger pool created before the round, the founders bear that dilution too, so add it to the investor's percentage when you calculate what the round really costs.
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