10% is a large drag on the cap table.

If that actually becomes material, they'll offer to buy shares in the next round. That's the point at which this whole conversation becomes interesting; right now, it's complexity for its own sake.

I know the feeling! I left a company some years back in a complicated way, and my instinct was to drill in as well. It seems like a big deal! It really isn't, though.

▲

apparent 2 days ago | parent [-]

Or they'll find a way to dilute the co-founder's shares so they don't have to buy them out.

	▲	tptacek 2 days ago \| parent [-]
		If that's going to happen, it's going to happen. I've heard as many stories of it happening as I've heard stories of people unhappy with the amount of liquidity they were able to achieve early in the life of a company that later became successful.

▲

takklz 2 days ago | parent | prev | next [-]

This is a joke right? Seed investors will get 10-30% of a company for under a million dollars which will be blown through in less than a year. That’s means they’re a drag on the cap table right?

▲

umeshunni 2 days ago | parent | prev [-]

What does that mean?

▲

tptacek 2 days ago | parent [-]

That theoretically future investors will be reluctant to invest because the founder 10% is crowding out equity that could otherwise be used to attract key performers down the line.

▲

throwpoaster 2 days ago | parent [-]

Nah, they can just issue more. He's already giving up 40% -- plenty of head room.

	▲	FreakLegion 2 days ago \| parent \| next [-]
		The exact details are unclear from the original post, but he definitely isn't giving up 40%. If they've only raised the pre-seed (a reasonable inference given the low valuation), then 10% ownership after 18 months points to two co-founders and a combined investor and option pool dilution of 20%. Anything is possible, of course, but unless the deal terms were very non-standard, this scenario makes the most sense. You're right that 10% isn't necessarily a huge deal for investors, though. Early-round investor models target a specific ownership stake, and the company has to issue the same number of shares for that no matter what the composition of existing shareholders is. The challenge with founders leaving is more psychological, like an early engineer who's vested a quarter of their 1% grant realizing that they still have to work hard for three years just to get a tenth of what the guy leaving already has. That's an easy way to suffocate the remaining team's motivation. Potential investors will (and should) look into it, but most of the time it's fine.
	▲	tptacek 2 days ago \| parent \| prev [-]
		I'm not saying I agree with the concern, I'm just articulating what it is. I think the answer here is super simple: walk away with the 10% vested. (Also: stop thinking in terms of %).