Founder Dilution

In my experience, it will generally take three to four rounds of equity capital to finance the business and 20-25% of the company to recruit and retain a management team. That will typically leave the founder/founder team with 10-20% of the business when it’s all said and done.

Employee Equity: How Much?

A common question entrepreneurs have is how much equity you should grant when you make a hire. Fred Wilson addresses that question in this post.

Fred Wilson

I asked [an experienced board member] “what exactly does a CEO do?” He answered without thinking:

“A CEO does only three things. Sets the overall vision and strategy of the company and communicates it to all stakeholders. Recruits, hires, and retains the very best talent for the company. Makes sure there is always enough cash in the bank.”

I asked, “Is that it?” He replied that the … [ Read more ]

MBA Mondays

Venture capitalist Fred Wilson is well known in tech circles for his regular blogging and free advice. He’s just wrapped up his “MBA Mondays” series, and it’s full of good advice for those looking to start their own business, tech or otherwise.

Wilson basically covers all the questions that an investor, a consultant, or an accountant would ask a business owner to answer in founding and … [ Read more ]

Venture Fund Economics: Gross and Net Returns

Fred Wilson follows up his original venture economic post with this look at venture returns, specifically the impact on returns of management fees and carry.

Venture Fund Economics

Fred Wilson explains the basics of venture fund economics. It appears to be the first of several posts he’s planning to write on this topic. [Hat Tip to Brad Feld]

Fred Wilson

One of the things we are doing in the venture capital business by raising ever larger fund sizes and amassing larger pools of capital under management is creating problems and then making them the entrepreneur’s problem.

And so we tell the entrepreneur that we need 20% of his or her company to solve our problem. I don’t think that’s right. I’ve said this before and I … [ Read more ]

Venture Fund Distributions – Cash versus Stock

Fred Wilson blogs about how VC funds distribute returns to limited partners, in particular looking at the issue of whether it is better to distribute stock or cash.