How much equity should you give away?

“How much equity should I give away?” is the most asked question in early fundraising and the least useful one, because it treats the percentage as the decision. It is not. It is the output.

What you actually decide is how much money you need and what the business is worth. The percentage follows.

The arithmetic nobody enjoys

If you raise £500,000 at a £2m pre-money valuation, the post-money is £2.5m and the investor owns 20%.

That is the whole calculation. Everything else — the negotiation, the deck, the conversations — is about the two inputs.

So the honest version of the question is: how much do I need, and can I defend a valuation that makes that amount a sensible share?

The range, and why it exists

Early priced rounds commonly land somewhere between 10% and 25% for the round. That is not a rule, and it is not a target. It is where the arithmetic tends to land when a sensible raise meets a defensible valuation.

Below about 10%, an investor often has too little to justify the work of the deal. Above about 25%, a founder has usually either raised too much too early or accepted a valuation they could have argued.

Why giving away too much early is the expensive mistake

It is not the percentage itself, it is what it does to the rounds that follow.

Every subsequent round dilutes everyone. A founder who sells 40% at seed, then does two more rounds, can find themselves with a minority stake and limited control by Series A — at which point incoming investors start asking whether the founders are still sufficiently motivated. That question, once asked, is very hard to answer well.

The cap table is read as a signal about the future, not just a record of the past.

Why giving away too little is also a mistake

Under-raising to protect the percentage is the quieter version of the same error.

Raising too little means running out early, which means raising again in a hurry, which means raising on worse terms than you would have got with more time. The dilution you avoided arrives anyway, with interest.

What actually moves the number

Revenue. Nothing else moves a valuation as reliably.
Evidence rather than assertion. A signed contract beats a pipeline; retention data beats a growth story.
Competition for the round. Two interested investors do more for your valuation than any amount of argument with one.
The instrument. A convertible note defers the question; debt avoids it entirely.
Preparation. A raise that looks organised is valued more generously than one that does not, for reasons nobody will state out loud.

What to work out before the conversation

Three numbers, in this order.

What you need to reach the next milestone that genuinely re-rates the business — not the next twelve months, the next proof point.
What that amount implies at a valuation you can actually defend with evidence.
What the cap table looks like after two more rounds of ordinary dilution.

If the third number is uncomfortable, the problem is in the first or the second, and it is much cheaper to fix now than later.

The part that gets forgotten

Percentage is not the same as control. Board composition, consent rights, and share class do more to determine who decides things than the raw split does.

A founder with 70% and a shareholders’ agreement full of investor consent rights may have less practical control than one with 55% and a clean board. Read that document as carefully as you read the valuation.

Mark Johnson is a Director of BDM Wealth Management, which introduces capital raising opportunities across bonds, loan notes, IPOs and SEIS/EIS. To discuss a raise, get in touch.

BDM Wealth Management is an introduction business and is not regulated. This article is general information, not financial, tax or legal advice, and does not constitute an offer or invitation to invest. Capital is at risk and you may get back less than you invest. For high-net-worth and sophisticated investors only. Take independent professional advice before making any investment decision.