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Nothing. Stock will get diluted. Typically every 'Series' fundraise will add 10-20% option pool and dilute the company by another 10-20% of preferred shares. Th
by diziet 11y ago
Nothing. Stock will get diluted. Typically every 'Series' fundraise will add 10-20% option pool and dilute the company by another 10-20% of preferred shares. The 'idea' is you have a smaller piece of a larger pie.
Very incredible companies will raise at better terms and valuations and dilute more. This is very rare.
- nbevans 11y agoIndeed. In other, perhaps less "SV" companies, I've seen it happen where the CEO wants to bring in an associate as perhaps the COO, CTO, CFO or some other high level position. Obviously such a person won't just leave their "megacorp" job without some shares being offered to join the riskier venture. So they end up diluting the company just so that a certain % can be given to this new "super experienced and respected head". It is sold to the rest of the company that he will bring in new customers. What actually happens is almost nothing. No real value is created. Just expectations are created. This can be the same with "fund raising". Just because the company has diluted itself and now has a few million in the bank... it still has to spend that money wisely and correctly in order to realise a genuine "the pie is now bigger than before" that the shareholders were expecting.
- peter303 11y agoThe Social Network movie shows some classic screwings in this case.