Founders are now able to raise seed funding with significantly less dilution, often around 10% or even less, compared to the historical average of 25-35%.

It's crucial for founders to understand their dilution when raising money through SAFEs or convertible notes, as they may end up owning significantly less of the company than expected after a priced round.

Founders need to be aware that their ownership percentage can decrease significantly due to dilution from SAFEs and new equity rounds, so they should plan accordingly for future fundraising. The percentage of ownership for SAFE investors is based on the valuation cap in the SAFE, and if the priced round valuation is higher than the cap, they convert at the cap, receiving more shares for the same investment than Series A investors.

Understanding the mechanics of dilution and cap tables is essential for founders to navigate the fundraising process effectively. I hope this will not be anything new to you as we discuss raising money on post-money SAFEs and what happens as you hire people and issue equity to employees.

Startups typically allocate between 10% and 20% of their equity for employee incentives, and venture capitalists often require this equity pool to be established before investing.

Investors should exercise their pro-rata rights to maintain their ownership percentage during subsequent funding rounds, as early investors can face significant dilution otherwise.

Founders should be cautious about how much they raise on SAFEs, as it dilutes their ownership in the company.

Choose your valuation carefully; too high can scare off investors, while too low can lead to excessive dilution. The goal is to get the money in the bank and get back to work. Don't over-optimize your fundraising process; focus on the essentials instead.

Before distributing equity, consider how many people you need to hire and how much equity you plan to allocate for their compensation. The first employee at a traditional Silicon Valley startup typically receives between one and two percent equity.