How Startup Funding Works PDF
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This document describes the different stages of startup funding, from the initial idea to an IPO. It outlines the various funding rounds and who is involved, along with the percentages of equity awarded at each stage.
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# How Startup Funding Works A hypothetical startup goes from idea to IPO ## Money Raised * $235,000,000 * $2,000,000 * $200,000 * $15,000 ## Stages of Funding **100% of Nothing is a lot less than 17% of a Big Company...** ### Idea Stage **How you get it** * You start the company. **What yo...
# How Startup Funding Works A hypothetical startup goes from idea to IPO ## Money Raised * $235,000,000 * $2,000,000 * $200,000 * $15,000 ## Stages of Funding **100% of Nothing is a lot less than 17% of a Big Company...** ### Idea Stage **How you get it** * You start the company. **What you give** * Founder 100% ### Co-founder Stage **How you get it** * Co-founder does half of the work. **What you give** * Founder 1 50% * Founder 2 50% **What everyone does** * Option pool? Stock set aside for future employees. ### Seed Round **At $1 Million Valuation** **How you get it** * Friends and family invests before anyone else at the lowest price. **What you give** * Founder 1 37.5% * Founder 2 37.5% * Uncle 5% * Option pool 20% **What everyone does** * Option pool ### Series A **At $4 Million Valuation** **How you get it** * Angels invest at least $1,000,000 or $200,000 annually - they are accredited investors. They invest their own money. **What you give** * Founder 1 31.2% * Founder 2 31.2% * Uncle 4.2% * Angel 16,7% * Option pool 16.7% **What everyone does** * Option pool ### Early Venture Capitalists **At $10 Million Valuation** **How you get it** * Venture capitalists persuade other people to put money in their fund. They invest that money, starting at $500,000. **What you give** * Founder 1 19.2% * Founder 2 19.2% * Uncle 2.6% * Angel 13.5% * First Employee 1.8% * Option pool 10.3% * VC 33.3% **What everyone does** * Option pool ### Early Employees **At $50 Million Valuation** **How you get it** * Early employees gamble on your company by accepting a low salary plus some stock. **What you give** * Founder 1 17.6% * Founder 2 17.6% * Uncle 2.4% * Option pool 12.45% * Angel 9.5% * First employee 1.7% * Public 8.3% * 30.5% **What everyone does** * Option pool ### Investment Bankers **At $2.6 Billion Valuation** **How you get it** * Investment bankers do IPO paperwork and sell a lot of your stock, getting 7% of the whole IPO for it. **What you give** * Anyone after your company does the IPO, anyone in the world can become your investor. **What everyone does** * IPO (Initial Public Offering) - some more series of funding **Source:** paulgraham.com/startupfunding.html, bloomberg.com
