What percentage of equity should I give investors?
Short answer
I would not start by choosing a fixed percentage of equity to give investors. The right ownership structure depends on the opportunity, the capital being contributed, the responsibilities of the parties, and the value each participant brings. In my discussions of co-investing and deal structures, I emphasize that different investors want different levels of ownership, control, and participation. There is no universal equity percentage that makes sense for every transaction.
Checklist
- Understand what each party contributes to the transaction.
- Distinguish between passive investors and operating partners.
- Consider whether the investor wants direct ownership or participation through a fund.
- Identify the responsibilities of the sponsor or operating team.
- Discuss control rights and decision-making responsibilities.
- Understand whether co-investment or co-GP participation is relevant.
- Evaluate the structure from both the investor's and operator's perspectives.
From my talks
"You can get creative with it to try to structure something where if you know you're a target investor type that they're going to find it very appealing."
I discussed how investors may negotiate co-investment rights, co-GP participation, or preferential access to future opportunities. One example involved allowing investors to participate directly in selected investments alongside a broader fund commitment.
These arrangements illustrate that ownership economics are only one part of the discussion. Control, participation, and alignment can also influence whether investors find a transaction attractive.
What to do next
- Document what the investor and operator each contribute.
- Compare the different participation structures discussed above.
- Have qualified professionals review any proposed ownership arrangement before implementation.
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Work through it with the dilution calculator.
