How equity dilution works Monday, February 26, 2007
Gaebler Ventures have a simple explanation here of how dilution works which is highly relevant for startups.
However, the two elements that are omitted are
a) provision can be included such that the equity allocated is maintained. Hence, in the example, the VC could be allocated a percentage of the shares not owned by the COO
b) if the COO is a key executive who will be a key factor in the creation of value, most VCs would want to ensure that they are appropriately incentivised and remunerated for their efforts. If they become disillusioned or demotivated, the VC's investment will be affected.
Sadly, they don't allow comments on their site (so Web 1.0) otherwise I would have posted these comments on their directly.
Labels: equity dilution
posted by John Wilson @ 9:49 PM Permanent Link
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