BG #60 – How Much Can Founders Take Off the Table When Successfully Raising Funds? 💸

If I come to you and say: Invest $10,000,000 in my company...

...but only $6,000,000 will be used for growth – $4,000,000 will go to me.

Selling your shares when investing in a startup is known as “taking money off the table.”

And it’s not always welcomed.

Many investors I've met have said bluntly:

100% of my investment is for company growth, I do not agree to let anyone cash out.

I've talked to many founders who don’t know how to properly approach this conversation with investors.

Or make requests like the one at the beginning of this post.

If you approach it the wrong way, investors might think you’re not committed.

This can ruin the entire deal.

But if you don’t have this conversation, you might end up eating ramen forever.

We’re not talking about founders accused of hiding or embezzling investor funds.

We’re talking about you, a founder who has dedicated time and money to your startup.

Here are 03 steps for founders to handle taking money off the table:

Step 1: Ensure You're Paying Yourself Properly 💼

A reasonable salary is a mitigating factor and makes things easier.

No investor wants their founder to worry about covering monthly expenses.

They want you to be compensated fairly so you can focus 110% on the startup.

So, if your salary increases significantly after receiving funding,

No one will object – just don’t increase it to an absurd level.

For founders in Vietnam, an annual salary ranging from $24,000 (Seed) to $60,000 (Series B) is reasonable (excluding bonuses).

Assuming your salary is in line with this, you need to explain…

Step 2: Explain Why You Need the Money 💬

Yes, when you’ve poured your heart, soul, and money into the company for years,

At some point, you need to see something from it, right?

If you want it from investors, you need to justify your reasons.

Sometimes you just need the money you’ve invested in the company, for a specific expense.

For example:

• You need money for a wedding.
• You need money to care for a newborn.
• You need money to place a down payment on your first home to settle and focus on work.

Be transparent and don’t make a big deal out of it.

In any case…

Step 3: Be Ready to Negotiate, and Don’t Overreach 📝

In most cases, I see founders cashing out easily

With a substantial amount of shares when:

• The startup is profitable and growing without needing additional funds. Other investors will be happy to buy back shares from the startup to earn dividends.
• The startup isn’t profitable yet, but is growing rapidly. Following the revenue formula of tripling in 3 years, doubling in the next 2 years.

Most others don’t achieve this, so

You’ll follow the general rule:

5% of a funding round (i.e., $500K on a $10M round) is typically OK.

But if it’s >10%, be prepared for strong opposition.

This will be an unavoidable discussion.

Always remain reasonable, logical, and courteous.

The harder you push, the more they might try to change the startup’s valuation terms or even withdraw from the deal.

Think from the investor’s perspective:

“This founder needs to sell some of their shares.

I will have a larger ownership stake in the company.

But do I have doubts about the founder’s commitment and responsibility in the future?”

Try to keep the cash-out to a minimum.

The more you can endure taking less money out early on,

The better your startup’s valuation will be later if you want to sell.

Typically, from Series B onwards, when the startup has established itself,

Founders will sell their shares in larger quantities and at better valuations.

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