Questions

For example, in a friendly Angel round, if an Investor is investing equitv to 1% and also getting equity equivalent to 1% for consultancy work (CFO). If one happens before the other (there's a couple of others joining in same way too), what happens with dilution? a) The new guy dilutes one part against another as it's a second process in shareholding dilution and he's now in with the first part so proportionally dilutes too? (e.g. equity dilutes by a further x% as precedes consultancy agreement). b) Existing shareholders dilute total 2% bearing the cost of any dilution as this person(s) are expecting 1% for both aspects at this stage - as mentioned this is a friendly round, definitely want to be fair, but don't want to set an unnecessary bad precedent as will likely be future round(s) or even more likely due diligence against exit in next year or 2. Thanks!

This is a legal question, I would like to have a look at the term sheet for the recommendation and advisory. It is not that simple to answer about the dilution of the equity. The agreement will show the way for equity dilution.


Answered 3 years ago

Unlock Startups Unlimited

Access 20,000+ Startup Experts, 650+ masterclass videos, 1,000+ in-depth guides, and all the software tools you need to launch and grow quickly.

Already a member? Sign in

Copyright © 2020 Startups.com LLC. All rights reserved.