How much equity should I offer to investors?

How much equity should you be prepared to offer to get that first investor? Is it worse to ask for too little or too much? We chat to financial experts to find out.

As an entrepreneur, your business can be an intensely personal thing.

Turning a burning idea into a fully-fledged entity takes you on a rollercoaster of emotions that only those who experience it can truly understand.

Little surprise then, that the impact this journey has can make it all the more difficult for you to give up control.

But as hard as it may be, you have to be prepared to take advantage of investment when the time is right.

Even if that means offering an investor a large chunk of equity to catapult yourself forward.

Searching for the magic number

Every business is different, so whether you’re considering Angel Investment, Private Equity or another type of finance entirely, there’s no set standard to determine how much equity an entrepreneur should be looking to offer.

There are, however, a number of words of wisdom to take on board and pitfalls for a business to avoid when taking their first big step.

A lot of advisors would argue that for those starting out, the general guiding principle is that you should think about giving away somewhere between 10-20% of equity.

Giving up any more right off the bat could prove risky if your business grows as time goes on, as it’s possible you may face multiple funding rounds further down the line, which will dilute your share further and further.

So, if you’ve ‘chased the money’ and immediately given away a significant chunk, you could end up with far less than you’d initially hoped further down the line.

What about going lower still? Why not opt for a series of smaller raises instead? It’s certainly an option, but along with the potential risk that you may not secure the amount you feel you may require up front, it’s also worth reversing the situation and asking how involved an investor with so little equity may be.