Your First Investor Equity — Be Careful

It’s tempting to trade equity early for a small check — but giving up too much, too soon, to the wrong investor can create long-term problems. Keep your structure clean, set terms wisely, and raise only what you need.

Why it Matters

Investors come with expectations, control rights, and dilution.

Early investors may ask for more than their check warrants. Bad terms now can scare off good investors later.

Founders Checklist

Use standard instruments: SAFE or convertible notes
Don’t give equity for intros or advice
Avoid priced rounds until you have traction
Raise from people who bring more than just money
Cap your valuation with future rounds in mind

Founder Fails

Giving 10–20% of company for <$100K
Letting investors set terms without legal advice
Accepting board rights too early
Using custom or non-standard documents
Not understanding how SAFEs convert

When to ask for Help

You’re raising your first check and reviewing SAFE/convertible terms
You want to evaluate how much equity is fair for early investors
You need to compare investment structures (SAFE vs. priced round)
You’re getting unusual investor requests (board seat, high % ownership)
You’re deciding whether to raise now or bootstrap longer

Frequently Asked Questions

Q: What’s a SAFE?
A: Simple Agreement for Future Equity — a popular way to raise pre-seed funds without setting a valuation.

Q: What does “valuation cap” mean?
A: It’s the max valuation at which your SAFE converts into equity — it protects early investors from dilution.

Q: Should I raise now or wait?
A: Depends on traction and needs. Don’t raise out of panic. Raise to build something specific.