How is the dilution of shares in a startup?

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Eduard Baksheev2014-08-27 01:26:24

Startups

Eduard Baksheev, 2014-08-27 01:26:24

Good afternoon, we are currently registering a company in Hong Kong. The investor wants 20% STATIC. Is it possible? I have never seen (read) that this is the case in practice.
Suppose that a startup is extremely promising and attracts a certain amount of venture investments within 3-5 years, while closing rounds, say, B and C.
Does the first investor still have 20%???

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4 answer(s)

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Vadim Kyssa, 2014-08-27
@cissav

He just wants all subsequent rounds to be closed at the expense of your share. Future investors may well be satisfied with the option in which they will take exactly your share, and not in parts - from you and the first investor.
That is, such an option is possible, but the investor, of course, will do well in this case :) In this case, everything depends on the risks. Maybe he is trying to balance the risks and the likely success. If he takes a big risk by investing in your project, then he should receive more than others with a favorable outcome.

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Eduard Baksheev, 2014-09-01
@Edu

20% is not much if it blurs
Durov had, by the way, only 20% of VK at the time of its creation

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Yorzic, 2014-09-11
@Yorzic

Here's what I recommend reading:
siliconrus.com/2013/05/vse-chto-vyi-hoteli-znat-pr...

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Undercover_VC, 2014-09-29
@Undercover_VC

It's not humane. And not reasonable. called full ratchet. You need to look at the entire term sheet. In principle, all investors can easily remove this requirement, because it will then ricochet over them.
Calmly answer that you do not agree, because. this jeopardizes all other rounds.
They will insist - answer that you are ready only for the weighted average with the founders vested period of 3 months.