Scott Painter says founders think they'll give up 1 or 2 percent to raise money, but typically sell about 30 percent of their company across funding rounds. Most end up with far less equity than they expect unless they've already put in personal capital or found alternative funding sources.
[FOREIGN LANGUAGE] For whatever reason, I tend to be a salt lick for entrepreneurs in LA who want to go raise money. They come and they ask me, you know, can you help me raise money? And I always try to make time and I listen. The one thing that I think consistently to me comes up in those conversations is that people think they're going to sell 1 or 2 points in their company and raise a couple hundred thousand dollars. One thing is almost always true. You almost are— always are gonna sell 30% of your company. That is a really interesting place to start as an entrepreneur because you gotta get your head around the fact that you're giving up 30% of the equity in something that you're creating and that totally depends on you to make it or not. And this notion that certainly a startup or a privately held company has value to anyone else is completely blown. It is absolutely absolutely true. What others will pay for is what it's worth. The notion that you're going to be able to raise money without selling enough of the company is probably the most important thing to get right as an entrepreneur. The math of how this works is that you need to be thinking about how many rounds of financing you're going to need in order for the company to turn a profit before you go into it to decide how much of the company you're going to own and what your strategy is for how you're going to own that. And there are certainly entrepreneurs that retain 20-30% of their company and they raise a lot of money. I would say that's very much the exception, and in most cases where you see that, it's because somebody's already made money doing something else and they put up the initial capital.
