How Startup Funding Works

HOW STARTUP FUNDING WORKS BY ANNA VITAL



A HYPOTHETICAL STARTUP GOES FROM IDEA TO IPO



IPO (Initial Public Offering)



how much you get it



money raised

$235,000,000

$2,000,000

$200,000

$15,000



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 100%



founder 1 50%

founder 2 50%



founder 1 37.5%

founder 2 37.5%

option pool 20%

uncle 5%



option pool?

Stock set aside for future employees.



founder 1 31.2%

founder 2 31.2%

angel 16.7%

option pool 16.7%

uncle 4.2%



founder 1 19.2%

founder 2 19.2%

VC 33.3%

first employee 1.8%

angel 10.3%

option pool 13.5%

uncle 2.6%



founder 1 17.6%

founder 2 17.6%

public 8.3%

VC 30.5%

first employee 1.7%

angel 9.5%

option pool 12.45%

uncle 2.4%



what everyone does



YOU

start the company.



CO-FOUNDER

does half of the work.



FRIENDS AND FAMILY

invests before anyone else at the lowest price.



ANGEL INVESTORS

has at least $1,000,000 or $200,000 annually - is an accredited investor. Invests her own money.



VENTURE CAPITALISTS

persuades other people to put money in his fund. Invests that money, starting at $500,000.



EARLY EMPLOYEES

gambles on your company by accepting low salary plus some stock.



INVESTMENT BANKERS

does IPO paperwork and sells a lot of your stock, getsing 7% of the whole IPO for it.



ANYONE

after your company does the IPO, anyone in the world can become your investor. BY ANNA VITAL HOW STARTUP FUNDING WORKS IPO money raised A HYPOTHETICAL STARTUP GOES FROM IDEA TO IPO (Initial Public Offering) how much $235,000,000 at $2.6 billion valuation you get 100 % OF 17% OF A NOTHING IS A LOT LESS THAN BIG COMPANY.. SERIES A $2,000,000 at $4 million valuation SEED ROUND $200,000 at $1 million valuation $15,000 FAMILY AND FRIENDS IDEA STAGE CO-FOUNDER STAGE how you get it АПа SPLITTING THE PIE what uncle 2.6% founder 1 option pool you uncle give founder 13.5% angel 37.5% founder 1 19.2% 10.3% first employee 100% 20% 1.8% option pool 37.5% 19.2%/ 33.3% founder 2 founder 2 uncle 2.4% option pool uncle VC founder 1 4.2% angel first founder 1 option pool 16.7% employee 1.7% 31.2% 9.5% 50% founder 1 17.6% 50% option pool? 31.2%\ 16.7% 17.6% 30.5% founder 2 Stock set aside for future employees. angel founder 2 what founder 2 public everyone does YOU CO-FOUNDER FRIENDS EARLY INVESTMENT ANYONE BANKERS ANGEL VENTURE AND FAMILY INVESTORS CAPITALISTS EMPLOYEES invests before anyone else at the lowest price. persuades other people to put money in his fund. Invests that start the does half of the work. has at least does IPO after your $1,000,000 or $200,000 annually - is an accredited gambles on your company paperwork and by accepting low salary plus your stock, some stock. company does the IPO, anyone in the world can getsing 7% of the become your investor. company. sells a lot of whole IPO for it. investor. Invests her own money. money, starting at $500,000. FundersandFounders.com sources: paulgraham.com/startupfunding.html, bloomberg.com some more series of funding 12.45%