The article discusses the importance of a proper cap table for startup founders, emphasizing that excessive dilution of ownership can lead to a broken cap table, defined as dropping below 20-30% ownership by later funding rounds. This dilution not only impacts a founder's control but also their motivation to advance the startup. The article advises on avoiding common pitfalls and provides insights on maintaining equity sustainability to achieve long-term success in funding and operational goals.
A broken cap table occurs when founders' ownership drops to unsustainable levels, typically below 20-30% by Series B or C funding rounds.
These thresholds highlight when founders lose substantial control and influence, which can deter future investors and limit a startup's ability to succeed.
A broken cap table is not just a numbers problem - it has far-reaching consequences for your startup, affecting founders' motivation and business success.
Excessive dilution can signal a startup potentially losing its foundational vision and entrepreneurial spirit, endangering long-term goals.
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