How much equity should I give an investor?

CA Vijay R Singh, FCA
Chartered Accountant · ICAI M.No. 153926 · FRN 136869W

Short answerIt’s driven by the amount raised and your valuation: equity given = investment ÷ post-money valuation. Most early rounds involve giving up roughly 10%–25%, but there’s no fixed rule. Give away too much too early and you over-dilute; the aim is to raise enough at a fair valuation while keeping founders meaningfully motivated.

It's maths, then judgement

The mechanical answer is simple: the equity an investor gets = their investment ÷ the post-money valuation. So ₹1 crore into a ₹5 crore post-money company is 20%. The judgement is in the valuation and how much you raise — both of which set the dilution. There’s no fixed ‘right’ percentage.

Typical ranges and the balance

Early rounds commonly involve giving up roughly 10%–25%, but it varies widely. The balance to strike: raise enough to hit your next milestone, at a fair valuation, without over-diluting the founders so early that they lose motivation or can’t survive future rounds. Remember the ESOP pool often dilutes founders too. Model dilution across future rounds, not just this one.

A worked example

Example: you need ₹1.5 crore to reach your next milestone. At a ₹6 crore post-money valuation, the investor takes 25%; at ₹10 crore, 15%. Raising more than you need at a low valuation needlessly over-dilutes. A cap table showing dilution through several rounds helps you decide. Our team can model the dilution for your raise.

Startups

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This answer is general information for founders and startups, not tax or legal advice. Tax rates, thresholds and forms change with each Finance Act — please confirm the current position for your own facts, or speak to us, before acting.