Why 25% founder dilution is the red flag that kills deals

Beyond that but and obviously, less is even better, but 25% to me is kinda like the cutoff.

20:54 / 21:33

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 actually for that reason because it's difficult to have the conversation with telling people that you should own less of the business than you do. And so it is very difficult to unwind. There are some investors that, like, if they fall in love with a company and they just say, okay. We'll help you fix it. We'll talk to your other investors and explain to them that, you know, investing at, like, a $1,000,000 valuation was probably

About this clip

VC Yuri Sagalov explains why founder dilution above 25% becomes a major red flag for investors and why it's extremely difficult to fix once it happens. He discusses how some investors will pass entirely on over-diluted companies because unwinding bad cap table structures requires uncomfortable conversations about people owning less equity.

Why this clip

Provides a specific numerical threshold (25%) that founders can use to evaluate their cap table health and explains the real consequences of poor equity management.

20:54 - 21:3340stactical advice

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