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Venture Deals

How do you determine the number of shares in a company?

How do you determine the number of shares founders have?
How do you determine employee option pool size?
How do you determine what amount SAFE converts at? 
How to determine how much to raise and not loose too much stake in the company?
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None of these have one-size-fits-all kinds of answers - these are all complex, so here is some brief, high-level info. There are books such as Venture Deals (by Brad Feldt) and other handbooks readily available online on these topics. 

  • While typically startups start with a nice round number of 10M shares of common stock authorized, with a majority going to the founders, it will depend on the number of founders, their dynamics, experience, intellectual property involved, etc. 
  • At formation, startups often set up a stock option pool size between 1M and 2M shares of common stock reserved for issuance. This will depend on many factors though, including key employees, contractors, business model, etc.
  • While a startup can set a valuation cap on a SAFE, it generally does not directly determine what amount a SAFE converts at - this will depend on the amount of money being raised during a priced round, the exact (and custom) terms, etc. YCombinator has a webinar regarding this topic. 
  • Please see here regarding raising and post priced round dilution: https://www.decilehub.com/base/1-general_questions/21536-what-is-the-optimal-ownership-percentage-for-founders-post-series-a

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