To gain the most financial reward out of your business, you need to retain the most equity possible. Do what you need to grow, but don't dilute yourself to the point where you'd need a huge exit just to make a little bit of money. Mark Zuckerberg retained 26% equity in $FB His net worth is $72 billion as of November 2019. How did Zuckerberg retain 26% in Facebook? Facebook started with some side money in February 2004. By September 2004, just seven months later, it had ad revenues. Peter Thiel was the first outside investor. Thiel invested $500,000 for $10% of Facebook. Many startups get $50k for 10% equity, or even less. Thiel invested $500k for 10%, giving it a $5M valuation. That kept the cap table healthy (founder(s) still have 90%) and Facebook remained attractive for follow-on rounds. Let’s take a look at all the Facebook rounds September 2004: $500K Seed Valuation: $5M May 2005: $12.7M Series A Valuation: $100M Revenue Run Rate: $6M May 2006: $27.5M Series B Valuation: $525M By this point, only a bit over two years after starting, everyone was talking about Facebook. It began opening to the public and away from just being a university social network. Zuckerberg wielded a lot of negotiating power in each round. VCs wanted in, but Zuckerberg didn't get carried away, realizing what it would mean for his ownership stake. October 2007: $240M Series C Valuation: $15B Revenue run rate: $150M Yahoo wanted to buy Facebook for $1B in July 2006. Investors wanted to sell. Zuckerberg, on the other hand, did not want to sell. Zuckerberg won, because he had the power of control due to his keeping a majority stake in the company. 2 Lessons from Zuckerberg - Don’t raise too much money too soon - Focus on revenues to keep valuations high and minimize dilution Ownership matters - Use a non-equity accelerator. - Don’t raise money too soon. - Early funding destroys cap tables. - Destroyed cap tables are a disaster for future funding. - Most importantly, take care of your ownership.