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I worked on this handbook quite a bit — thanks to OP for posting it on HN! A pleasant surprise :) To answer your first question, dilution has little to do wit

I worked on this handbook quite a bit — thanks to OP for posting it on HN! A pleasant surprise :) To answer your first question, dilution has little to do with how you structure the equity and more to do with the price at which you sell it (and how much of it you sell). The more your company is worth, the less you will need to sell to raise the same amount of money.

R0b0t1 5y ago
There's different types of equity that you need to use to frame your answer. Nonvoting equity is colloquially not seen as diluting your ownership because you retain the reigns. How to actually try to set such a thing up, especially when you're still private but wanting to transition to public, is extremely useful to founders and something I've not managed to find good information on myself. A bunch of older threads on here went down the path of "you're going to get fleeced by your VC, just accept it because they have infinite lawyers."
- swampthing 5y ago
  There’s close to zero chance you can sell investors non-voting shares as an early-stage startup. There is non-voting equity that can convert into shares, but they will certainly dilute you even if they don’t convert and those shares will almost always have voting rights. If you’re anywhere close to taking your company public, you should have attorneys that can help you with preparing for that and point you to whatever information you’re looking for. At the time of investment, good VCs typically don’t care about any one investment enough to put much effort into fleecing you. My experience is that good startups aren’t at any significant disadvantage in terms of attorneys. Just make sure to get a good one that has done a lot of financings.
  - R0b0t1 5y ago
    The problem I've encountered in a lot of legal adjacent areas is most attorneys just are not very good. I have no idea if any given attorney is keeping up with the state of the art. Also, a lot of legal curricula are very pro-business, which means many attorneys have a inbuilt anti-worker and anti-founder bias. I know nonvoting shares are usually a hard sell, but I've seen people pull it off. It's worth reminding investors that they are giving you their money on loan because they do not have business ideas, you do.

R0b0t1 5y ago

There's different types of equity that you need to use to frame your answer. Nonvoting equity is colloquially not seen as diluting your ownership because you retain the reigns. How to actually try to set such a thing up, especially when you're still private but wanting to transition to public, is extremely useful to founders and something I've not managed to find good information on myself. A bunch of older threads on here went down the path of "you're going to get fleeced by your VC, just accept it because they have infinite lawyers."

swampthing 5y ago
There’s close to zero chance you can sell investors non-voting shares as an early-stage startup. There is non-voting equity that can convert into shares, but they will certainly dilute you even if they don’t convert and those shares will almost always have voting rights. If you’re anywhere close to taking your company public, you should have attorneys that can help you with preparing for that and point you to whatever information you’re looking for. At the time of investment, good VCs typically don’t care about any one investment enough to put much effort into fleecing you. My experience is that good startups aren’t at any significant disadvantage in terms of attorneys. Just make sure to get a good one that has done a lot of financings.
- R0b0t1 5y ago
  The problem I've encountered in a lot of legal adjacent areas is most attorneys just are not very good. I have no idea if any given attorney is keeping up with the state of the art. Also, a lot of legal curricula are very pro-business, which means many attorneys have a inbuilt anti-worker and anti-founder bias. I know nonvoting shares are usually a hard sell, but I've seen people pull it off. It's worth reminding investors that they are giving you their money on loan because they do not have business ideas, you do.