5 Ways to Retain the Majority of Your Equity in Seed Rounds Without Losing Money

Starting a business is exciting, but it’s also important to make sure you don’t give away too much of your company along the way.

When it comes to raising money for your startup, keeping control of your company’s ownership is key. You want to keep as much ownership as possible while still getting the funds you need.

Here are five simple ways to hold onto the majority of your equity while still securing the funds you need:

1. Bootstrap as much as possible:

It’s all about starting with what you have and making it count. Look at your savings, tap into your network of supportive friends and family, and even consider loans if necessary.

By relying on personal savings, revenue generated from initial sales or services, or loans from friends and family, you minimize the need for external funding. This means you’re not diluting your ownership stake by bringing in outside investors early on.

2. Build Strategic Partnerships:

Look for partners who bring something unique to the table, whether it’s expertise, access to markets, shared values and vision that can help propel your startup forward or a strategic partner who opens doors to new opportunities.

Instead of traditional equity financing, these alliances allow you to access the resources needed for growth while retaining full ownership of your startup.

You can catch up on our previous newsletter on how to build and maintain strategic partnerships here.

3. Negotiate Favorable Terms with Investors:

While there’s no one-size-fits-all secret to closing big partnership deals, BlackCrest has put together the top strategies that successful businesses employ to close deals and win the market. You check that out here.

When it’s time to talk with investors, don’t be afraid to negotiate. Negotiate terms that protect your interests while still enticing investors.

Instruments like convertible notes or SAFE agreements allow you to defer valuation discussions until later rounds, preserving your equity stake at the seed stage. Also, negotiating for anti-dilution provisions or pre-money valuation caps can protect your ownership stake from dilution in future financing rounds, ensuring that you retain a majority of equity over time.

When it comes to fundraising, Take the time to build relationships with potential investors, share your story authentically, and focus on building trust.

4. Focus on Growing Traction:

Investors love a good success story, so focus on building traction and hitting milestones that would make them sit up and take notice. Whether it’s securing your first paying customers, hitting revenue targets, or securing strategic partnerships.

Each milestone before seeking external funding builds credibility and can increase your valuation and bargaining power with investors. This allows you to raise funds at higher valuations, minimizing the amount of equity you need to give up and retain a larger portion of equity in seed rounds.

5. Diversify Funding Sources and Funding Rounds:

Just like in life, it’s never a good idea to put all your eggs in one basket. Don’t rely solely on traditional equity financing, explore alternative funding options that align with your startup’s needs and stage of growth.

Revenue-based financing, debt financing, or grants offer capital without diluting your ownership stake, allowing you to retain control over your startup’s equity structure. Diversifying your funding sources not only reduces the risk of diluting your equity but also gives you more control over your startup.

Remember, every percentage point of equity retained is a valuable asset as your company grows and matures.

Stay resilient, stay strategic, and stay focused on building a successful and sustainable venture.

We are rooting for you.