First and foremost and to re-iterate what many HNers has already said: you are NOT in any way obligated to sell. That said, it is in your best interest to be pr

First and foremost and to re-iterate what many HNers has already said: you are NOT in any way obligated to sell. That said, it is in your best interest to be pragmatic and get the most out of your equity (financial + emotional). Let the hardball CEO (imo he/she is doing his/her job) know that you are open to finding a mutually beneficial agreement, but you feel the initial offer is not something that entices you to sell. Ask for the term sheet of the funding round, because you need to know what will happen to your 5% stake to evaluate your options. I recommend viewing this as a business decision/transaction. Step 1 is to speak to a lawyer and accountant. Get their take on what your equity is worth, the tax implications, and evaluate the impact of the term sheet on your equity if you have it. Step 2 is to make a decision. How much equity do you want to sell? All, some? For how much? And what are the numbers behind your decision? How much of a discount are you willing to accept? If you want to sell all your stakes, the lawyer/accountant should be able to give you a valuation. Step 3 is to negotiate. You can do this through your lawyer if you want to avoid mixing business with personal relationships. Work with the CEO if you can, because if you decide to keep some equity, it is also in your best interest that the company completes the funding round successfully. Step 4 .. Profit! Disclaimer: I have absolutely no prior experience with this kind of event whatsoever. :)