We lost 30% even before hiring anyone! The untold story of cap tables, founders, investors, and the option pool trap

Last year, one founder approached me with the question, “We raised a fund, but it turned out we lost more equity in that one term sheet than the product we’d spent two years building!”

The story goes like this: the founder and his friend built a beautiful tech product and registered a private ltd company, splitting the equity 50-50; 1,000,000 shares in total and clean ownership. 100% equity ownership with the founders.

But then came the pitch decks, demo days, and one solid investor offer.
They were offered ₹2 Cr at a ₹10 Cr pre-money valuation.
Excitement? Through the roof.

But one line buried in the term sheet said:
“15% ESOP pool to be created pre-money.”

“Just employee pool,” they thought. “Fair, right?”

But here’s what happened

They gave away 30% of their company in a single round. 15% dilution for the investor and 15% for the ESOP pool. Now founders have 70% equity remaining. The 15% ESOP pool is reserved in case they might hire someone someday.

They were diluted for people who didn’t even exist yet.
Before their first product manager. Before their first marketing hire.
They lost ownership that they could never reclaim.

They came to me, frustrated:
“We built the product, got traction, built a team, raised money… but we’re left with barely 40-45% after Series A. Where did it all go?”

The Lesson Every Founder Must Learn

Here’s what I told them:

Your cap table is your startup’s memory card.
It records every promise you’ve made and every piece you’ve given away.

And if you don’t protect it, you won’t own your “own” story.

Cap Table Mechanics:

Explained Like Strategy, Not Spreadsheets

Founders’ Equity = Your Control

Don’t treat equity like confetti. Every percent is leverage; every share is trust.

Investor Math Is Not Always Founder-Friendly

When investors ask for an ESOP pre-money, they shift dilution onto YOU.
Post-money ESOP = shared responsibility. Ask for it.

Option Pool = Future Talent, Not Future Trap

Start with what you need. Not what you might need.

 Dilution Isn’t Evil, But Unaware Dilution Is

You will dilute. That’s part of growth. But plan it like a chess match, not roulette.

 Founders Reclaim Their Power

They renegotiated in Series A. Together we built a beautiful cap table model that projects the next 3 rounds ahead. And it worked.

Because no one respects a confused founder, but everyone bets on a prepared one.

Want to Build a Smart Cap Table?

At StartupsGurukul, we:

• Model your cap table for Seed to Series B
  
• Stress-test your dilution across all funding scenarios
  
• Help you negotiate ESOPs, SAFE notes, and founder vesting
  

Align your financial model with equity planning

Don’t forget, “If your startup is your baby, your cap table is the birth certificate. Don’t let others write their names before you even raise the child.”