How to calculate a fair percentage for an investor in 2025

From managing dilutions to market trends, an up-to-date comprehensive guide to considering investor equity for startups in 2025

For many founders embarking on the tumultuous path of entrepreneurship, the ultimate goal is to achieve an IPO or exit. Having set up a profitable and successful business, the idea of kicking back, sipping margaritas and relaxing with your pockets brimming over with cash is oh so alluring. But if founders have to repeatedly outsource their capital and part with a percentage of their company, how can they make it to our theoretical beach club? Well, fortunately, negotiating fair equity for founders, early stage and late stage investors is all part of the fundraising process. So, let’s take a look at what's involved, starting with the basics.

Founders access capital in different ways, including:

• Bootstrapping - Sourcing funding from friends, family or using own personal savings
• Crowdfunding - Using online campaigns & platforms to collect funding from the public
• AngelInvestors - High-net-worth individuals providing capital in exchange for equity or financial return. 
• Venture Capitalists - Companies able to provide large sums of capital to growth a business

You can check out our previous article, on the pros and cons of Bootstrapping vs. funded startups, to help you decide which one is best for your startup!

What factors are considered when deciding a fair percentage?

Just as you do when considering buying a new laptop, car or even upgrading your wardrobe, you most probably spend some time considering several questions, like, “Do I really need this?”, or, “Can I really afford to?”. Well, investors must do the same. In fact, investors have to really consider the proposal at hand and look at it from different angles, perspectives and give it a rather large dollop of critical thinking. So, what are the sorts of things investors consider when they decide on a fair percentage? Well, when investors consider a fair percentage, they often look at a variety of factors. These include: 

1. Investment Type - One of the most crucial factors to consider is whether an investor is providing an equity or debt investment. Usually, equity investments involve a higher degree of risk when compared to debt investments. With this in mind, investors may expect a higher return for equity investments.
2. Stage - As expected, as your business grows and changes, so do stakes. This means that investors financing early stage startups may ask for a higher percentage to offset the higher amount of risk involved. When your business is more firmly established, investors might be more inclined to accept a lower percentage.
3. Industry - Industries like healthcare and AI, unlike other sectors’ downward global trends, have witnessed an increasing market demand over the past years. As such, investors might be willing to accept a lower percentage of equity in a promising market, where the risk is lower. For the more underperforming markets with less demand, the risk for investors is higher, so returns will also increase. 
4. Market Trends - The fundraising landscape in 2024 has evolved since the 2021 investment explosion, and with that, the markets and mindsets too. The 2024 investment trend towards quality over quantity, promoted cautionary, yet mindful deals. Investors sought out meaningful equity in exchange for capital, prioritizing long-term partnerships instead of short-term wins. 
5. Risk - Ultimately, the whole process of devising a fair percentage for an investor boils down to one determining factor: risk. Across the board, investors will have to outweigh the risk/reward relationship to finalize their offer. If a business is in a high-risk sector, investors are probably going to want more for their buck and ask for a higher return. 
6. Competition - When a sector is saturated with competition, investors are taking a greater risk backing your company over others. Founders should expect investors to propose a higher share in the company if the market is crowded.
7. Valuation - If a company has a high valuation, proving its worth, founders can usually negotiate with investors to maintain more equity. That’s why getting a fair valuation is critical in deciding a fair investor percentage.
8. Expected Return - Finally, if an investor sees growth and scale potential in a business, you might just be able to lower the percentage, in exchange for a larger return on the initial investment.

What is a fair percentage for each stage?

So, imagine this - you’ve got this radical new idea that is going to transform the biotech sector and you're about to kick start the first round of investment. Or, you’re a well established early-stage start up, with good product-market fit, and you're about to embark on another fundraising round. In both scenarios, you will need to decide on how much your investor(s) will get in return for their investment(s). But, how much equity is a fair percentage for an investor? And, how much equity should you give to an investor at each stage? Lucky for you, we’ve put together a rough guide on what to expect to help with the negotiations. Generally, investor equity ranges for a startup in today’s landscape can be organized into the following: 

PRE-SEED STAGE

• At this ideation stage, a startup can expect to receive between $10,000 and $250,000. Investing at this risky stage usually means investor equity can be somewhere in the range of 5-15%. Of course, if the product has demonstrated potential or the team has a solid history in building business, founders might be able to negotiate investor equity in the lower range.

SEED STAGE

• Seed stage investment usually means that there’s a viable product on, or about to be launched into, the market. Capital at this round usually ranges between $250,000 and $2 million. As expected, when the investment size increases, so does the equity, with investors aiming for around 10-20% in equity. 

SERIES A 

• With investment ranges between $2 and $15 million, the stakes are high. Investor equity at this stage amounts to around 15-25%. Yet, if founders can show their product has significant traction, they may be able to keep that figure to 15%.

SERIES B 

• At the scaling stage the focus is on expanding operations and markets, with investment size at its highest, ranging anything upwards of $15 million. Usually companies at this point will have a higher valuation and, as such, investor equity can be around 5-10%.

What is a good investor ratio?

As a startup journeys through the fundraising maze, new investors will join the action. As such, it’s important a healthy, yet conducive, balance is achieved, with respect to percentage equity of founders and early stage investors versus new investors. Establishing this “good investor ratio”, allows founders to retain control of their company, while equally attracting enough funding to promote growth and development.

How to negotiate a good deal?

Before entering into any negotiations, it's important founders do the following: 

1. Understand your business - From the pros to the cons, knowing your business like the back of your hand is essential. Being able to clearly define your business model and explain how your product translates into profit is a baseline requirement for any negotiations. 
2. Research your industry & market - An investor will want to see you’ve clearly spent time analyzing the market you wish to penetrate. Seek out global and current trends in your industry and get to know the typical investment deals in your industry. 
3. Know your investor & their perspective - Investors are looking for profit and reward, which is why they will hone in on the potential risks and rewards of investing in your business. That’s where Angels Partners can really help - with a vast database of active investors, you can find out their most recent deals to stay on top of an investor’s activity.
4. Be transparent - Being clear about your financial projections, revenue and goals is a truly crucial part to successful negotiations. Both parties, founders and investors, are seeking a common goal, so it's important to promote a collaborative process based on trust and integrity.
5. Be prepared to negotiate - Every founder wants what they perceive is best for their company, but that might not completely match an investor’s view. Be willing to listen to the other side of the table and be prepared to concede on some areas - there’s no such thing as perfection!

Having successfully negotiated with investors, setting off from the proverbial startup startline, and growing the company into further fundraising rounds, the next part to consider is how to maintain a fair percentage of equity for all the parties involved. To make sure a startup retains a “good investor ratio” it’s important to address the following points:

1. Managing Dilution - In order for founders to mitigate excessive dilution, it's commonplace for a startup to set a range for dilution per each round. This is usually set to between 10 and 15% and ensures founders and early employees maintain ownership across several rounds.
2. Adjusting Option Pool - Before a new investor’s share is calculated, an option pool is normally “topped up” by 10-20% of total equity. This is important as this pool of capital allows for appropriate hiring when expanding, without jeopardizing any founders’ or early investors’ shares.
3. Cap Table Balance - Finding the sweet spot between founders having just enough equity that they maintain control but doesn't spark risk-sharing concerns for investors, and not having enough that it discourages team members from pursuing the long term company goals is essential. 
4. Clauses for Anti-dilution - For early stage investors, negotiating anti-dilution clauses is a way for them to protect their equity. Careful consideration of how to clearly define these clauses (e.g., weighted-average rather than full-ratchet anti-dilution) is critical for maintaining fairness throughout the company’s lifetime. 

Let's take at an example: A successfully balanced startup, post series A, could look like:

In general terms, a good investor ratio outcome will culminate in founders retaining 20-30% ownership after series B (or later), meaning inventors maintain a meaningful position, but mitigates the possibility of them having complete control of the company.

If you are looking to raise funds for your startup today, head over to Angels Partners to access a whole network of active investors and get your fundraising off to the best start!