How Much Company Should You Give Up for Growth Capital—and Who Gets Paid First?

A growth-capital round is not priced only by the percentage of shares you sell. Founders need to size the raise around a specific milestone, model what happens in a weak exit, and separate corporate-growth funding from financeable assets or receivables.

In September 2015, Good Technology, the US mobile-security company once valued near $1 billion, was sold to BlackBerry for $425 million.

That sounds like a respectable exit. It was not, for many of the people who owned the company.

According to Delaware court papers, Good could not make the following week’s payroll. Its preferred shareholders recovered most of their payout rights before common shareholders received much. Good’s own financial statements had placed several preferred share series ahead of common stock.

This is the scene founders should keep in mind when an investor offers a large cheque. The danger is not merely giving away too many shares. It is needing money so badly that the company accepts terms which only reveal their true cost when things go wrong.

Now contrast that with Gymshark, the British fitness-apparel company founded by Ben Francis. It waited eight years before its first institutional transaction. On 14 August 2020, General Atlantic bought 21% at a valuation exceeding £1 billion, took one board seat, and Francis increased his holding to more than 70%.

The difference was not that Gymshark had discovered a magic percentage to sell. It had demonstrated international demand and an operating model before institutional capital became necessary. Capital was useful. It was not existential.

Gymshark waited for operating proof before selling 21% to General Atlantic in 2020. Photo: daylon / Wikimedia Commons, CC BY-SA 4.0.

So here is the question behind every growth round: how much of the company must you really give up to grow, and what else are you giving away besides shares?

The percentage is the easy part

Most founders begin with a tidy calculation: investment divided by the company’s value after investment equals dilution, the reduction in their ownership percentage.

That tells you what the investor owns on day one. It does not tell you who receives money first if the company is sold cheaply. It does not tell you whether the investor can block debt, a budget, a sale or a future fundraising. And it does not tell you whether some of the funding need could be met without permanently selling ownership.

What surprised us was how often these three questions get separated in practice. They are really one decision:

1. 1.What percentage do you own?
2. 2.What is that percentage worth in a weak sale?
3. 3.Who controls the decisions before that sale?

The aim is not to raise the smallest possible amount. That can leave a company back in the market, desperate, before it has proved anything new. The aim is to raise enough for a specific, valuation-changing milestone, plus a costed contingency.

Carta’s Q2 2026 US data puts median dilution at 19.4% for seed, 18.7% for Series A and 13.4% for Series B. Software medians reported by Carta in December 2025 fell to 10% at Series C and 7.5% at Series D. Later investors normally pay for evidence, not plans.

Gymshark is the human version of that statistic. It did not avoid dilution by refusing capital. It waited until its proof gave it more bargaining power.

Tabby. Photo: Alvesgaspar / Wikimedia Commons, CC BY-SA 3.0.

Why investors ask for the terms founders dislike

Option pools, liquidation preferences and veto rights can feel like investor overreach. Sometimes they are. But they are also forms of downside protection.

An employee option pool is a reserve of shares for current or future staff. Investors ask for it because a growing company needs people, and they do not want their new money used to fund a business that cannot hire the team required to execute the plan. The negotiation is over who pays for that future hiring.

A liquidation preference is an investor’s right to be paid an agreed amount before ordinary shareholders in a sale. Investors demand it because, unlike a lender, they may receive nothing if the business fails. The preference protects their downside when an exit is disappointing.

Veto rights work similarly. An investor who cannot force repayment like a bank may want consent rights over decisions that could increase risk, such as taking on debt, issuing new shares or selling the company at a low price.

The important point is not that these protections are illegitimate. It is that founders should price them honestly. A term sheet is not one number. It is a bundle of claims on the company’s future.

The clause that silently changes the maths

Carta explains that investors commonly ask for option-pool top-ups to be included in the pre-money capitalisation. In plain English, existing holders absorb the dilution before the investor’s new shares arrive.

Take a founder who owns 90% before a $10 million investment at a $40 million pre-money valuation. With no pool top-up, that founder retains 72% after the investment.

Now add a 15% post-money employee pool. The founder does not retain about 65%. The founder falls to roughly 58.5%, assuming the 15% pool is created before the investment and no other holders change. The new investor still receives its agreed economics, while the existing holders fund the enlarged pool.

That is a much sharper result.

At first glance, a pool is simply a hiring tool. In the cap table, it is also a transfer of value. The right response is not to reject it automatically. It is to ask how many hires the pool covers, when they will be made, and whether the pool should be sized for a real plan rather than a standard request.

For a deeper look at how headline fundraising numbers can hide the real cost, read The Most Dangerous Number in a Funding Announcement.

The sale price that did not save Good

Good Technology shows why ownership percentage alone is a poor survival tool.

A simple illustration makes the point. If an investor pays $10 million for 20% of a company and it sells for $30 million, ordinary 20% ownership is worth $6 million. But a 1x non-participating preference gives the investor $10 million instead, if that is better than converting into ordinary shares. A participating preference gives the investor the $10 million back and then 20% of the remaining $20 million, or $14 million.

The market is not uniformly punitive. Cooley’s Q4 2025 US sample found 98% of deals used 1x preferences and 96% were non-participating. Its European 2025 data found 77% at 1x non-participating and participating preferences in only 1% of deals.

Still, averages are not your documents.

Good had the more dangerous combination: a looming payroll, funding dependency and several preferred series ahead of common shareholders. The company’s $425 million sale price did not erase the order in which claimants were paid. It activated it.

Put Good and Gymshark side by side and a pattern appears that neither story says outright: the real cost of capital rises when a founder has no time left to negotiate its terms. A lower valuation is painful. A lower valuation plus senior payout rights plus vanishing runway can rewrite the outcome altogether.

Before signing, build three exit waterfalls, meaning calculations showing who receives sale proceeds and in what order: a downside sale, a base case and an upside case. Do not stop at the percentage on the cap table.

See A Decent Exit Can Still Be Worth Zero to Founders for the practical implications of that calculation.

Not every growth pound needs to buy shares

M-KOPA, the Kenya-based provider of financed products including handsets and solar systems, made a different decision in May 2023. It raised more than $250 million, but over $200 million was sustainability-linked debt arranged by Standard Bank. Sumitomo supplied $36.5 million of equity.

IFC documentation describes part of the structure as five-year, local-currency, senior secured loans backed by customer receivables. M-KOPA matched equity to the uncertain risk of building the platform and debt to receivables that could be financed. By September 2025, it reported three million active customers and $2 billion of credit deployed.

M-KOPA matched equity to platform risk and used debt against financeable customer receivables. Photo: Nicholas Githiri / Pexels, Pexels licence (free commercial use).

Tabby, the Saudi Arabia and UAE buy-now-pay-later business, made the same separation in another form. It raised a $200 million Series D at a reported $1.5 billion valuation on 1 November 2023, later extending that equity round to $250 million. On 21 December, it secured up to $700 million of receivables securitisation from J.P. Morgan, funding backed by a pool of customer receivables.

The apparent funding requirement was $950 million. The equity requirement was not.

This is where most people stop looking. They see a company announce hundreds of millions in financing and assume every dollar diluted the founders. M-KOPA and Tabby show why that can be badly wrong.

Debt is not free. It brings interest, lender conditions, security over assets and default risk. SVB’s September 2023 guidance put venture debt at roughly 20% to 40% of the last equity round, normally adding about six months of runway, and advised debt service below 25% of net burn. A $5 million facility amortising over 30 months can increase the cash need of a company burning $250,000 monthly by more than 50% once repayments begin.

So the question is not, “Can we avoid dilution?” It is, “Can the cash flow carry debt without turning a future fundraising or sale into an emergency?”

Control has its own price

Grab, the Singapore-founded platform business, made the distinction between economics and control unusually explicit in its 2021 SPAC documents. Each Class B share carried 45 votes. Class B holders could appoint and remove a board majority. Anthony Tan was expected to control approximately 66.11% of voting power after closing.

Economic dilution and voting dilution did not move together.

Atlassian, the Australian software company, reached a similar destination by a different road. It was profitable and self-funded before its first external investment, a $60 million deal with Accel in July 2010, eight years after formation. The money supported expansion and acquisitions, and provided employee liquidity. At its 2015 IPO, Accel held 12.5% before the offering, while Class B holders had approximately 96.7% of post-IPO voting power.

Neither structure is a universal answer. Grab’s arrangement preserved founder control but weakened ordinary shareholders’ governance power. Atlassian had the luxury of waiting because it was already profitable.

The lesson is simpler: negotiate control separately from ownership. Ask who appoints directors, which decisions need consent, whether you can raise debt or issue shares, and what happens if you miss plan. A minority investor can have a very large practical say.

Read The Control You Give Up May Not Be in the Cap Table before treating ownership percentage as the whole deal.

GI Network's view: The best growth round is not the one with the lowest headline dilution. It is the one that funds a clear proof point without creating a payout, repayment or control problem if the plan takes longer than expected.

What founders should bring to the table

Before approaching investors, prepare a monthly 24-to-36-month operating model that identifies the exact milestone and cash required to reach it. Build a fully diluted cap table that includes options, warrants, SAFEs, convertibles and pro-rata rights.

Then test three funding structures: a milestone-sized equity round, a larger equity round, and an equity-plus-debt alternative where receivables or assets can genuinely support borrowing.

For each structure, show:

• ownership after every option and conversion right;
• three exit waterfalls;
• the debt repayment schedule and downside runway; and
• board seats, reserved matters, information rights, drag rights and voting arrangements.

GI Network would begin by pressure-testing that model before investor outreach: identifying the exact cash gap, testing whether receivables can support debt, mapping the exit waterfall, and rehearsing the questions an investment committee will ask about downside protection. Only then would we match the company with capital providers whose terms fit the business rather than merely its immediate cash need.

Use the Milestone Cost Test

Before accepting growth capital, apply the Milestone Cost Test:

1. 1.Name the next valuation-changing milestone in one measurable sentence.
2. 2.Cost the monthly cash needed to reach it, with a specific contingency.
3. 3.Compare a milestone-sized equity round, a larger round and any realistic debt alternative.
4. 4.Model the option pool and every right that can become shares.
5. 5.Calculate downside, base and upside exit waterfalls.
6. 6.List who controls the board and which decisions require investor consent.
7. 7.Accept the extra cost in ownership, exit value and control only when it creates a faster or more certain path to the milestone.

That is the test Good Technology never had the room to apply. It is the leverage Gymshark had earned. And it is the distinction M-KOPA and Tabby made when they refused to treat every dollar of growth funding as equity.