[akharris]

Thanks - at any given round, dilution is driven by how much money the founder agrees to take. No outside party can force a founder to take dilution, it takes an agreement on both sides.

While VC ownership targets are part of their business models, founders don't actually have to agree to meet them. From what I've seen, those targets are far more flexible than anyone admits at the start of a negotiation.

[daniel_levine]

While I tend to agree with you in principle, I'm curious how often YC is flexible on the ownership target :P

[akharris]

This is part of my point, founders don’t have to accept our deal even though we put it in writing ahead of time. It’s not the founders responsibility to make our business model work, it is their responsibility to build a great company. If we agree on an entry point for us to go along for the ride, great!

[aabhay]

This is exactly the issue though? Investors say “hey you don’t have to raise from us if you don’t want to give up X% of the company”. Which leaves no room to negotiate.

The ONLY time you can expect to sell a smaller % of the company in a round is if you go to an investor and say “hey this OTHER investor wants the same % but is paying more, are you willing to take a lower % at a higher valuation?”. However, this seems very rare and the VC driving up the valuation is usually a higher tier VC in a bidding war, so founders are likely to go with them.

Long story short, if you want to convince founders to sell less of the company, you have to convince top tier VCs to take less, and founders will follow suit.

[TuringNYC]

No outside party can force a founder to take dilution, but unless you are the hot oversubscribed startup, rounds are often just enough money and you find yourself coming back hat in hand to be diluted over and over.