How many shares do I have to give away?

The #2 question about venture deals really, really annoys me:

  1. You don’t give away shares. You sell them.
  2. You don’t have to sell shares. You choose to.


How many shares do I sell?

You can answer this question using the following logic.


When will you (fictively) sell your startup? Assume at the end of year 3.

What are your startup’s earnings before interest, tax, depreciation and amortization (EBITDA) in the year after exit? Assume $1.0m.

What multiple is a buyer willing to pay for your startup at the time of exit? Assume 5.

An EBITDA of $1.0m and an EBITDA multiple of 5 result in an exit value of $5.0m.

How many milestones do you have to achieve before your exit? Assume 3 milestones.

What is the probability of success for each milestone? Assume 80%.

Three milestones with a probability of success per milestone of 80% result in a probability of success for your startup of 51%.

An exit value of $5.0m and a probability of success of 51% result in an expected value of $2.6m.

What internal rate of return (IRR) does an investor want? Assume 10%.

An exit in 3 years, an expected value $2.6m and an IRR 10% result in a valuation for your startup of $1.9m.

How much money do you want to raise? Assume $200k.

A 200k investment at a $1.9m post-money valuation results in your startup issuing 10.4% new shares.

Scope: 1) you are at seed stage, 2) you raise 1 round of financing and 3) you are debt free at the time of exit.


Thanks to Hans Westerhof and Chretien Herben.

Joachim Blazer is founder at Venture Value. Contact him at

Venture Value does startup valuations for founders who want to raise money with an investor.