• February 2020
    M T W T F S S
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At seed funding stage, how can a Startup protect itself from losing the majority?

Well, if your startup has no value because there is no revenue, I’m going to presume that you’re just looking toward the future (which is a smart thing to do). However, for people who may be reading this and just considering the idea of starting a business I’m going to say the following:

Without revenue and without an accurate valuation, you will not attract investors right away.

Okay, so with that out of the way, let me move on to your question. How can the founder(s) protect themselves from losing the majority? You take the data that you have related to your revenue and valuation and take the necessary time to consider what you’re willing to give up in order to get the funding that you need for each round.

To ensure that you (and any co-founders) hold on to the majority, plan ahead. What are the things that each of you can do now and moving forward that reduces the likelihood that you’re going to need funding from an outside source. A second job? A side-hustle? Crowdfunding that offers a reward for support aside from a slice of equity? Continuously ensuring that you’re making the best use of the funds that the startup has is another positive option.

With that said, look for investors who are looking to incentivize how well you and your team do your job so that they get the most for their investment. You want an investor who is less interested in owning and running your business and more about looking to get a good return out of it. You have the right to say no to an investor who is pressuring you to give up more equity than what you’re comfortable giving.

If you elect to go after investors, do not sign anything without first having an attorney look over the document to help you determine if the deal is in the best interest of your startup. LawTrades is a legal marketplace and we work to support startups by providing access to quality, vetted attorneys at a reasonable flat-rate. Our start-to-finish project management and efficient processes has helped thousands of businesses obtain the legal protection that many typically lack. Hope to assist you soon!