# Preseed Founders Should Think in Dilution Not Valuation Caps

Author:

Peter Walker

|  
Read time: 2 minutes  
Published date: May 27, 2025

The argument over valuation caps often obscures the simpler reality: total raised divided by cap equals ownership sold—dilution is the number founders should...

Pre-seed founders: stop obsessing over your valuation cap and start thinking in terms of dilution.

It's the same equation, right? Fundraising on SAFEs looks like:

𝗧𝗼𝘁𝗮𝗹 $ 𝗥𝗮𝗶𝘀𝗲𝗱 / 𝗩𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻 𝗖𝗮𝗽 = 𝗘𝘅𝗽𝗲𝗰𝘁𝗲𝗱 𝗗𝗶𝗹𝘂𝘁𝗶𝗼𝗻

(Assuming you're raising on post-money SAFEs, which almost everyone is, and you don't have wild terms attached in a side letter).

But the majority of time is spent arguing over the valuation cap portion of that equation, whereas I think founders would be better served to spend time on the dilution piece.

So - how much of your company are you willing to sell in your pre-seed round?

𝗦𝗺𝗮𝗹𝗹 𝗦𝗔𝗙𝗘 𝗥𝗼𝘂𝗻𝗱

- Raising $500K or less

- Sell between 3%-6% of the company (although the upper tail is quite high, up to 12%)

𝗣𝗿𝗲-𝗦𝗲𝗲𝗱 𝗥𝗼𝘂𝗻𝗱

- Raising $500K (small pre-seed) up to $2M (big pre-seed)

- Sell between 10%-15% of the business

𝗦𝗲𝗲𝗱 𝗼𝗻 𝗦𝗔𝗙𝗘 𝗥𝗼𝘂𝗻𝗱

- Raising $2M-$5M on a SAFE

- Sell between 18%-23% of the company (in line with dilution from a priced seed round which is typically 20%)

𝗕𝗶𝗴 𝗦𝗔𝗙𝗘 𝗥𝗼𝘂𝗻𝗱

- Raise over $5M

- Sell 22%+ of the company

- Only available to specific, already legible founders

Take a look at the Y Combinator deal for reference. Every YC company gets 2 SAFEs from YC:

- SAFE 1: $125,000 for a fixed 7% of the business

- SAFE 2: $375,000 on an uncapped MFN SAFE

No valuation caps mentioned. Just cash for ownership as the mental model.

Raising on a $10M cap post-money SAFE does not mean your business is worth $10M. Focus on the dilution and let the val cap fall where it may.

Here's to a better fundraising Q2 for pre-seed!