Startup Equity Cheat Sheet

📈 Equity Dilution Formula

Ownership After Round = Current Ownership × (1 - Dilution %)

Example: If you own 60% and raise a round that dilutes you by 20%:
60% × (1 - 0.20) = 60% × 0.80 = 48%

💡 Pro Tip: Always calculate cumulative dilution, not per-round. Dilution compounds!

🛡️ SAFE Notes at a Glance

Valuation Cap

Your valuation can't exceed this cap. Lower cap = better for investors.

Price = Cap / Pre-money Valuation

Discount

Get shares at a discount to the priced round.

Price = Priced Round Price × (1 - Discount)

⚠️ Common Mistake: A $5M cap is NOT the same as a $5M pre-money valuation. The cap is the effective valuation ONLY for the SAFE amount.

⏳ Vesting Basics

Standard Vesting

4-year cliff: 25% vests at 1 year, then monthly over 3 years

Monthly Vest = Total Grant ÷ 48 months

Cliff Period

Nothing vests until the cliff (usually 1 year). If you leave before, you get $0.

💡 Pro Tip: Acceleration triggers let you vest remaining equity on acquisition or termination. Negotiate these!

💰 Runway Math

Runway (months) = Cash Balance ÷ Monthly Burn Rate

Gross Burn

Total monthly expenses

Salaries + Rent + Software + Marketing

Net Burn

Gross burn minus revenue

Gross Burn - Monthly Revenue

⚠️ Danger Zone: Start fundraising when you have 6 months of runway. It takes 3-6 months to close a round.

📊 LTV:CAC Ratio

LTV:CAC = Lifetime Value ÷ Customer Acquisition Cost

< 3:1

Unsustainable — You're spending too much to acquire customers

3:1 to 5:1

Healthy — Solid unit economics, room for growth

> 5:1

Great! — Consider spending more on acquisition

Payback Period

< 12 months is ideal for SaaS

CAC ÷ (ARPU × Gross Margin)

⚖️ Cap Table Best Practices

✅ Option Pool: Create before Series A (usually 10-20%)
✅ Pro Rata Rights: Allow investors to maintain ownership
✅ Liquidation Preference: 1x non-participating is standard
✅ Anti-Dilution: Broad-based weighted average is founder-friendly
✅ Board Seats: Keep founder control early (2-2-1)

⚠️ Watch Out: Participating preferred with multiple liquidation preferences can destroy founder economics at exit.

🎯 Key Milestones by Stage

Pre-Seed

• 1-2 co-founders
• $500K-$2M raise
• 10-25% dilution
• Product built

Seed

• Team of 5-10
• $2M-$5M raise
• 15-25% dilution
• PMF signals

Series A

• Team of 15-30
• $10M-$20M raise
• 20-30% dilution
• $1M+ ARR

Series B+

• Team scales fast
• Larger raises
• Less dilution per round
• Growth metrics

🔐 Common Terms Explained

Pre-Money Valuation

Company value BEFORE new money arrives

Post-Money Valuation

Pre-money + Investment = New valuation

Fully Diluted

All shares outstanding + option pool + all convertible securities

Pro Rata

Right to invest enough to maintain current ownership %

📊 Startup Equity Cheat Sheet

📈 Equity Dilution Formula

🛡️ SAFE Notes at a Glance

Valuation Cap

Discount

⏳ Vesting Basics

Standard Vesting

Cliff Period

💰 Runway Math

Gross Burn

Net Burn

📊 LTV:CAC Ratio

< 3:1

3:1 to 5:1

> 5:1

Payback Period

⚖️ Cap Table Best Practices

🎯 Key Milestones by Stage

Pre-Seed

Seed

Series A

Series B+

🔐 Common Terms Explained

Pre-Money Valuation

Post-Money Valuation

Fully Diluted

Pro Rata