Joe Bartlett Article, "The Dilution Concern for Founders"

The securities attorney Joe Bartlett is a spirited writer, so its awesome to see him blogging about startups.

And talking turkey about dilution typically suffered by founders and their earliest seed investors:

"Take a sample of one hundred venture-backed companies that have been successful enough to undertake an initial public offering, and you will find a disturbing fact lodged in a high percentage of their prospectus disclosures. That is, the earliest stage investors (the founders and angels) hold very small equity percentages and garner similarly small returns on their investment in the company."

You'll want to read the post for the nuance of the analysis and the color of Joe's prose, but I draw two upshots from the piece:

  • get to break even early and avoid the Series C and D rounds; and
  • establish a precedent for founder participation in the option pool (doesn't help angels, of course).

Both tasks, as Joe says, are easier said than done.


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