Terms: Startup Share Distribution

1- Introduction

There is no exact fair share distribution defined by any law of nature. What is worth considering is the unique potential growth of the Startup that you want to found or invest in. Consider 1% of USD 1M which is the same as 50% of USD 20K. Which one has more potential to grow, and is worth investing in?

In our Techno Incubation Center (TIC), we divide fundraising into at least 2 rounds, seed funding 1st-round, and 2nd-round. In the 1st-round, each early stakeholder receives xx% of share proportional to their contribution to their company for a period of time completing required deliverables. The share distribution is divided into 3 groups, Founding Team, Early Supporting Team, and Early Investors (see Section 2: Share Distribution Benchmark). The period of the 1st-round could be one year or a few years. For the 2nd-round of fundraising, some percentage of share from each shareholder is diluted proportionally and sold to other external investors. More fundraising rounds could be done, and follow the 2nd-round procedure.

*Note: The +/- 12% can be negotiated among all the stakeholders. In any case, an individual external investor can buy up to 10% of the share only. Any investor besides TIC is defined as an external investor.