SaaStr · 2015-08-18 · 3942d

Early Investor Expectations on Dilution from Founding Team Expansion

This article addresses how early-stage investors view dilution caused by expanding the founding team. The primary mechanism that mitigates direct investor impact is the use of SAFE notes and convertible debt instruments that base valuation on the capitalization of the company at the next financing round, rather than at the time of issuance.

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Example Pre-Money Valuation

2$M

illustrative example

early-stage financing scenario