How do you manage dilution in your cap table?
As my startup grows, I’m getting more concerned about managing dilution while bringing in new investors and incentivizing employees. How do experienced founders approach a cap table to ensure balanced equity distribution for founders, investors, and employees?
Dilution is a natural part of the growing process of any startup, and typically if you're experiencing dilution it's because you are gaining something in return - cash, in the case of investors, or sweat equity in the case of employees. There isn't an exact science to dilution/valuation in most cases, especially in the very early stages. You need to sell as much/as little of the company as is required in order to secure the resources you need to be successful. Owning 100% of something that isn't particularly is always going to be worse than owning 1% of a billion dollar company.
That said, there are generally some norms around percentages for co-founders, and employee option grants can be benchmarked against comp data that you can find in Carta or Pave.
Happy to chat more if that would be helpful!