Cap Table Concerns

Under OCV’s operating model, founders would receive lower equity ownership percentages compared to traditional ways of founding a startup with two co-founders.

Lower founder ownership is a valid concern for future investors. It tends to be more pronounced concern in early rounds, and less so in late stages.

One of the investors concerns is needing a larger options pool in the future to grant refreshes to the founders. Typically, founders do not participate in refresh grants. This is counter intuitive, but common in the market.

As a result, companies may lose potential investor interests because of CapTable concerns. YC will also express concerns. We recognize this as a headwind.

For our model (high risk for OCV) to work, OCV needs the high ownership. We won’t do a recapitalization. At the Seed round, the option pool typically will be 15%, slightly higher than the industry norm of 10%. This provides flexibility in equity grants. The company’s board will determine the allocation of the options pool including any refresh grants to founders. The size of the options pool at Seed round is in a side letter along with OCV’s initial SAFE investment.

Additionally, investor concentration may be a concern separate from founder ownership stake. New investors may see concentrated ownership by one investor as not having a diverse set of advice, opinions, and industry contacts.

The ideal scenario is for new investors to lead and participate in the Seed round to reduce OCV’s ownership percentage. In general, OCV is open to investing in or co-leading the Seed round only to support our companies. CEOs should feel free to leverage this if we commit but still try to find new investors to reduce investor concentration.

Our advice to founders is to focus on growth and grow fast to overcome these objections. Fast growth will overcome investors and YC CapTable concerns.