3 ms·
Percentages are irrelevant, once you've lost controlling share it doesn't matter if you have 49% or 4.9% - as 4.9% of something > 49% of nothing.
by mtkd 18y ago
Percentages are irrelevant, once you've lost controlling share it doesn't matter if you have 49% or 4.9% - as 4.9% of something > 49% of nothing.
- gjm11 18y agoSince the percentage you own is also the percentage you can sell later, it certainly isn't irrelevant.
- mtkd 18y agoSo you'd rather have 49% of a dangerously under funded company than 4.9% of a well funded company? If you sell equity for investment in to the business the total value of your shareholding has not reduced, but the company is more able to proceed. Too many shareholders blindly cling to equity for the sake of keeping a high percentage - when the business would benefit from further investment.
- tptacek 18y agoMeh. Most companies are "dangerously underfunded" until they're cash flow positive.
- brk 18y agoThis is not really true, but it seems to be a common thought here. VCs are investing in the whole package of founder+product/idea. VCs, like any other investor, are inherently lazy in that they would much rather that somebody else do all the work while they make all the money. If you maintain 49%, or even less, of a percentage you would generally only need 1 other board member to be on your side to "maintain control". No board or investor WANTS to go through the turmoil of replacing or fighting with the founders. If they did feel that way, they would likely not invest in the first place. When the company does finally get to the point that the stock has some real exercisable value, you will wish you had 49% instead of 4.9%, given the opportunity.