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HOW STARTUP FUNDING WORKS BY ANNA VITAL
A HYPOTHETICAL STARTUP GOES FROM IDEA TO IPO
IPO (Initial Public Offering)
how much you get it
at $2.6 billion valuation
100% OF NOTHING IS A LOT LESS THAN 17% OF A BIG COMPANY...
at $4 million valuation SERIES A
at $1 million valuation SEED ROUND
FAMILY AND FRIENDS
some more series of funding
SPLITTING THE PIE
what you give
founder 1 50%
founder 2 50%
founder 1 37.5%
founder 2 37.5%
option pool 20%
Stock set aside for future employees.
founder 1 31.2%
founder 2 31.2%
option pool 16.7%
founder 1 19.2%
founder 2 19.2%
first employee 1.8%
option pool 13.5%
founder 1 17.6%
founder 2 17.6%
first employee 1.7%
option pool 12.45%
what everyone does
start the company.
does half of the work.
FRIENDS AND FAMILY
invests before anyone else at the lowest price.
has at least $1,000,000 or $200,000 annually - is an accredited investor. Invests her own money.
persuades other people to put money in his fund. Invests that money, starting at $500,000.
gambles on your company by accepting low salary plus some stock.
does IPO paperwork and sells a lot of your stock, getsing 7% of the whole IPO for it.
after your company does the IPO, anyone in the world can become your investor.