An equity round (or priced round) sets a fixed valuation for your company. Investors buy preferred shares at a specific price, with formal rights and protections.
Pre-money is your company value before investment. Post-money is pre-money plus the investment amount.
Example: $10M pre-money + $2M investment = $12M post-money. Investors own 16.7% ($2M / $12M).
Determines who gets paid first in an exit. Standard is 1x non-participating: investors get their money back OR their ownership share, whichever is better.
Protects investors if you raise at a lower valuation later (down round). Standard is weighted average - adjusts their price based on the size of the down round.
At Series A, typical structure is 2 founders + 1 investor + 1 independent. Founders should maintain control until Series B or later.
Equity reserved for employee hiring. Typically 10-20%. Usually carved out of pre-money, which dilutes founders more than investors.
Right to invest in future rounds to maintain ownership percentage. Standard for lead investors.
Focus your negotiation energy on terms that matter most:
Negotiate key terms. Non-binding but sets expectations.
Investors verify your claims, review financials, talk to customers.
Lawyers draft final documents. Expect back-and-forth on language.
Sign documents, wire transfer, update cap table.
Total: 6-10 weeks typical. Budget $15-30K for legal fees.
Pitchkit helps you model dilution, understand term implications, and prepare for negotiations.
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