The seed round dilution red flag that makes most VCs pass immediately

That's probably the biggest red flag.

20:31 / 21:13

And that that makes it difficult because, you know, it's they're only gonna get further diluted from there. That's probably the biggest red flag. Like, usually, I like to see, as a rule of thumb, no more than, like, 20 to 25% dilution by the seed round. But, like, if they had a pre seed round with some advisers or friends and family and everything else, like, if that bucket is around 20 to 25%, that's healthy. Beyond that but and obviously, less is even better, but 25% to me is kinda like the cutoff. After that, I started thinking about, like, why why is it so diluted?

Yeah. No. I mean, I would be wondering the same thing, but I guess what do you do about it? Right? Is there a way to actually clean it up? How do you go about remedying that situation?

It's very hard. A lot of investors will pass

About this clip

Yuri Sagalov from General Catalyst reveals his hard rule for evaluating startups: no more than 20-25% dilution by seed round. He explains why excessive early dilution is a major red flag and discusses the harsh reality that it's extremely difficult to remedy once it happens.

Why this clip

This clip provides a specific, actionable metric that VCs use to evaluate deals, giving founders clear guidance on cap table management.

20:31 - 21:1342stactical advice

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