Equity dilution is one of the most important issues that startup founders must understand before accepting an investment. A founder may begin with 50%, 70% or even 100% ownership of a company, but that percentage can decrease substantially after angel investment, seed financing, venture capital rounds, employee equity plans and subsequent capital increases.

This process is known as equity dilution.

For startup founders in Turkey, dilution is not merely a financial concept. It is also a corporate law issue that may directly affect voting rights, management control, board representation, dividend rights, future investment negotiations and the founder’s proceeds when the startup is eventually sold.

A founder who does not understand dilution may believe that an investor is acquiring only 10% or 20% of the startup, while the combined effect of the investment, employee option pool, future financing rights and investor protections may reduce the founder’s position much more significantly.

For this reason, every founder seeking investment should understand the answers to several fundamental questions:

• What is equity dilution in a startup?
• How is startup dilution calculated?
• Does every investment dilute founders?
• Can founders prevent dilution?
• What are pre-emption rights under Turkish law?
• How do employee stock option pools dilute founders?
• What is an anti-dilution clause?
• What is the difference between full-ratchet and weighted-average anti-dilution?
• Can investors dilute founders through a capital increase?
• How can founders protect both their ownership percentage and company control?

This article examines startup equity dilution in Turkey and explains the principal legal and contractual mechanisms founders may use to prevent uncontrolled dilution.

What Is Equity Dilution in a Startup?

Equity dilution occurs when the percentage ownership of an existing shareholder decreases because additional shares or capital interests are created or issued.

The shareholder does not necessarily sell any shares.

Instead, the denominator changes.

Consider a very simple example.

A startup has 1,000 shares.

Founder A owns 600 shares.

Founder B owns 400 shares.

Therefore:

Founder A owns 60%.

Founder B owns 40%.

A new investor enters the company and the startup issues 250 additional shares.

After the investment, the company has 1,250 shares.

Founder A still owns 600 shares.

Founder B still owns 400 shares.

The investor owns 250 shares.

However, the percentages are now:

Founder A: 48%

Founder B: 32%

Investor: 20%

Founder A did not sell a single share.

Nevertheless, Founder A’s ownership fell from 60% to 48%.

That is equity dilution.

Is Equity Dilution Always Bad for Founders?

No.

Dilution is a normal feature of startup financing.

The relevant question is not merely how large a percentage the founder owns, but how valuable that percentage becomes.

Imagine two scenarios.

Scenario One

Founder owns 100%.

Company value: EUR 200,000.

Founder’s economic interest: EUR 200,000.

Scenario Two

After several investment rounds, founder owns 25%.

Company value: EUR 100 million.

Founder’s theoretical economic interest: EUR 25 million.

The founder has been significantly diluted but is economically in a much stronger position.

For this reason, the objective of startup founders should generally not be to prevent every form of dilution.

The objective should be to prevent:

• unnecessary dilution,
• unexpected dilution,
• abusive dilution,
• disproportionate dilution,
• and dilution that causes the founders to lose control without understanding the consequences.

Proper startup investment planning therefore concerns controlled dilution, not absolute resistance to dilution.

How Does Startup Investment Cause Dilution?

Investment can enter a startup in different ways.

The distinction between a primary investment and a secondary share purchase is particularly important.

Primary Investment

In a primary investment, the company issues new shares to the investor.

The investment money goes into the company.

Existing founders are normally diluted.

For example:

Before investment:

Founder A: 50%

Founder B: 50%

Investor contributes new capital in return for 20% post-money.

After investment:

Founder A: 40%

Founder B: 40%

Investor: 20%

The founders have both been diluted.

Secondary Share Sale

In a secondary transaction, the investor purchases existing shares directly from a founder.

Suppose:

Founder A: 50%

Founder B: 50%

Founder A sells 20% of the company to the investor.

Afterwards:

Founder A: 30%

Founder B: 50%

Investor: 20%

Founder B has not been diluted because no new shares were issued.

Instead, Founder A transferred part of an existing ownership interest.

Many startup transactions contain both primary and secondary components.

Founders should therefore examine precisely how investment is entering the company.

Pre-Money and Post-Money Valuation Affect Dilution

One of the most common reasons founders misunderstand dilution is confusion between pre-money valuation and post-money valuation.

Assume an investor offers EUR 1 million.

If the startup is valued at EUR 4 million pre-money:

Pre-money valuation: EUR 4 million.

Investment: EUR 1 million.

Post-money valuation: EUR 5 million.

Investor percentage:

EUR 1 million / EUR 5 million = 20%.

The existing shareholders collectively retain 80%.

Now assume the investor says the company has a EUR 4 million post-money valuation.

Investment: EUR 1 million.

Post-money valuation: EUR 4 million.

Investor percentage:

EUR 1 million / EUR 4 million = 25%.

The founders retain only 75%.

The commercial difference between 20% and 25% may initially appear small.

If the startup later sells for EUR 100 million, however, five percentage points represent EUR 5 million before taking other contractual rights into account.

Founders should therefore never approve an investment based solely on a headline valuation without determining whether it is pre-money or post-money.

What Is a Cap Table and Why Is It Essential?

A capitalisation table, commonly called a cap table, shows the ownership structure of the startup.

A professional cap table should normally identify:

• founders,
• existing investors,
• number of shares,
• percentage ownership,
• share classes,
• employee options,
• warrants,
• convertible securities,
• vesting arrangements,
• and the fully diluted ownership percentage.

The cap table should be prepared before signing the term sheet.

Founders should model not only the immediate investment round but also possible future rounds.

For example:

Incorporation

Founder A: 50%

Founder B: 50%

Seed Round

Founder A: 40%

Founder B: 40%

Seed Investor: 20%

Series A

Founder A: 30%

Founder B: 30%

Seed Investor: 15%

Series A Investor: 25%

Employee Pool Expansion

Founder A: 27%

Founder B: 27%

Seed Investor: 13.5%

Series A Investor: 22.5%

Employee Pool: 10%

A founder who originally owned 50% may eventually hold approximately 27% without ever selling personal shares.

This may still be an excellent outcome if the company value has increased significantly.

However, founders should know the likely dilution trajectory before accepting the first investment.

Pre-Emption Rights Under Turkish Law

One of the most important legal mechanisms protecting shareholders from dilution is the pre-emption right, known in Turkish corporate law as the rüçhan hakkı.

For Turkish joint stock companies, Article 461 of the Turkish Commercial Code provides that each shareholder has the right to acquire newly issued shares in proportion to the shareholder’s existing participation in the capital.

Suppose a founder owns 30% of an A.Ş.

The company increases its capital.

The founder may generally subscribe for a corresponding proportion of the new shares and thereby attempt to maintain the 30% ownership percentage.

This provides an important statutory protection against involuntary dilution.

However, there is an obvious economic requirement:

The founder must be able and willing to contribute the money necessary to subscribe for the new shares.

A pre-emption right gives the founder the opportunity to avoid dilution.

It does not give the founder additional shares for free.

Can Pre-Emption Rights Be Restricted?

Yes, but Turkish law imposes safeguards.

Under Article 461 of the Turkish Commercial Code, a shareholder’s pre-emption right in a joint stock company may be restricted or removed only where a just cause exists and the relevant resolution receives at least 60% of the share capital.

The law also provides that restriction or removal of the pre-emption right must not be used to unjustifiably benefit or disadvantage a person.

This rule is extremely relevant to founder dilution disputes.

Imagine that majority shareholders deliberately conduct a capital increase, exclude a minority founder from participating and allocate new shares to themselves for the primary purpose of reducing the minority founder from 20% to 2%.

Such a transaction cannot simply be assessed on the assumption that the majority may dilute anyone whenever it wishes.

The purpose, legal basis, corporate procedure and protection of shareholder rights must be examined.

Pre-Emption Rights in a Turkish Limited Liability Company

Turkish limited liability companies also have statutory protections against dilution.

Article 591 of the Turkish Commercial Code provides that, unless otherwise specified in the company agreement or capital increase resolution, each shareholder has the right to participate in the capital increase in proportion to the existing capital interest.

Restriction or removal of this right requires just cause and the qualified majority prescribed under Article 621. The law also prohibits unjustifiable advantage or disadvantage resulting from restriction of the subscription right.

Therefore, founders operating through an Ltd. Şti. should not assume that a majority shareholder can freely conduct any capital increase it wishes without considering the minority shareholders’ statutory rights.

Can Founders Completely Prevent Dilution Through Pre-Emption Rights?

Only if they have sufficient capital to continue participating.

Suppose Founder A owns 40%.

The startup raises increasingly large investment rounds:

Seed: EUR 500,000.

Series A: EUR 5 million.

Series B: EUR 20 million.

Founder A may theoretically have participation rights.

However, preserving 40% could eventually require the founder to invest millions of euros.

Most founders cannot do this.

Consequently, founder protection cannot rely exclusively on pre-emption rights.

Founders also need to protect:

• voting rights,
• board representation,
• consent rights,
• information rights,
• exit rights,
• and the economic rights attached to their remaining shares.

What Is an Employee Option Pool and Why Does It Dilute Founders?

Employee equity is another significant source of dilution.

Investors frequently require a startup to establish an employee stock option pool, commonly called an ESOP pool.

The pool may represent:

• 5%,
• 10%,
• 15%,
• or another percentage

of the fully diluted company.

The crucial negotiation issue is whether the option pool is created:

before the investment

or

after the investment.

If the investor requires the pool to be created on a pre-money basis, most or all of the dilution may fall on the existing founders.

This is sometimes called the option pool shuffle in startup financing discussions.

Example of Option Pool Dilution

Assume founders currently own 100%.

An investor proposes to acquire 20% post-investment.

Without an employee pool:

Founders: 80%.

Investor: 20%.

Now assume the investor additionally requires a 10% option pool to exist immediately after closing and wants the pool created primarily from the pre-investment ownership.

The founders may effectively end up with:

Founders: 70%.

Investor: 20%.

Employee pool: 10%.

The investor still owns the negotiated 20%.

The founders bear the additional dilution.

For this reason, founders should negotiate the option pool at the same time as valuation.

A high headline valuation may be less attractive if it is combined with a large pre-money option pool.

What Is an Anti-Dilution Clause?

The term anti-dilution has a specific meaning in venture capital transactions.

It usually refers to protection granted to investors if the company later issues shares at a lower price or valuation than the investor originally paid.

This commonly arises during a down round.

Suppose Investor A invests when the startup is valued at EUR 10 million.

Two years later, the startup experiences financial problems.

A new investor agrees to invest only at a EUR 5 million valuation.

Investor A may argue:

“I invested based on a much higher valuation. I want protection against this lower-priced financing.”

An anti-dilution clause can adjust Investor A’s economic position.

However, founders must understand an important point:

Investor anti-dilution protection usually creates additional dilution for someone else.

That “someone else” is frequently the founders and employees.

Full-Ratchet Anti-Dilution

A full-ratchet anti-dilution clause is one of the strongest protections an investor can receive.

In simplified terms, the original investor’s economic position may be adjusted as though the investor originally invested at the lower price used in the subsequent financing.

Example:

Investor originally purchases at EUR 10 per share.

New financing occurs at EUR 2 per share.

A full-ratchet formula may effectively adjust the investor’s rights based on the new EUR 2 price.

The resulting dilution for founders can be substantial.

For this reason, founders should treat full-ratchet anti-dilution clauses with considerable caution.

A term sheet describing the clause simply as “standard anti-dilution protection” should not be accepted without analysing the actual formula.

Weighted-Average Anti-Dilution

A weighted-average anti-dilution formula is generally more balanced.

Instead of looking only at the lower price, the calculation also considers the number of shares issued during the down round.

Therefore, a small emergency financing round at a low price does not necessarily produce the same economic adjustment as a major financing round conducted at the same price.

Two widely discussed versions are:

• broad-based weighted average,
• narrow-based weighted average.

Broad-based weighted-average formulas are generally more founder-friendly because the calculation uses a broader number of outstanding securities.

The exact economic effect must nevertheless be modelled before the investment agreement is signed.

Does Turkish Law Automatically Give Investors Anti-Dilution Protection?

No general automatic venture-capital anti-dilution right arises merely because someone invests in a startup.

Anti-dilution protection is ordinarily created through the negotiated investment and shareholder structure.

Implementation must comply with mandatory Turkish corporate law.

This is an important reason foreign venture capital documents should not simply be translated into Turkish and signed.

Concepts developed for Delaware corporations or other foreign corporate systems may require different implementation in a Turkish A.Ş. or Ltd. Şti.

The shareholders’ agreement, articles of association, capital increase resolutions and share rights should therefore be designed together.

Privileged Shares Can Affect Dilution and Founder Control

Turkish joint stock companies may create privileged shares within the framework of the Turkish Commercial Code.

Article 478 provides that privileges may be granted through the articles of association or an amendment to them. Such privileges may concern matters including dividends, liquidation proceeds, pre-emption rights and voting rights.

This can become important where founders want to separate:

economic ownership

from

corporate control.

A founder may become economically diluted but retain certain voting or governance protections through an appropriately designed share structure.

For example, investors may hold a greater percentage of economic equity while founder shares carry specific governance advantages, provided the structure complies with mandatory Turkish law.

Voting Privileges Can Protect Founder Control

Article 479 of the Turkish Commercial Code permits voting privileges through the allocation of different numbers of votes to shares having equal nominal value.

As a general rule, no more than fifteen votes may be attached to one share, subject to statutory exceptions requiring additional conditions.

This means that founders may potentially maintain significant voting influence even after their economic ownership falls.

However, voting privileges are not unlimited and do not override every mandatory corporate rule.

They should therefore be planned before significant external investment enters the company.

Dilution of Ownership Is Not the Same as Dilution of Control

This is one of the most important principles in startup financing.

Consider two founders.

Each initially owns 50%.

Following several investment rounds, each owns only 20%.

Investors and employees collectively own 60%.

This does not automatically mean that the founders have lost all control.

Their governance position may depend on:

• voting privileges,
• board nomination rights,
• reserved matters,
• founder consent rights,
• shareholder agreement provisions,
• and statutory voting thresholds.

Conversely, founders can retain 60% of the economic equity but still lose significant practical control if an investor receives extensive veto rights.

Founders should therefore model two separate forms of dilution:

Economic Dilution

How much of the company do I economically own?

Governance Dilution

How much influence do I retain over important company decisions?

Both matter.

Reserved Matters Can Protect Founders After Dilution

A shareholders’ agreement may identify certain reserved matters requiring founder approval.

Examples may include:

• issuing new shares,
• creating a new privileged share class,
• increasing the employee option pool,
• selling intellectual property,
• borrowing above a specified amount,
• changing the main business activity,
• selling the company,
• approving related-party transactions,
• removing the CEO,
• entering a major merger,
• or liquidating the company.

Founder consent rights can therefore protect founders even where their percentage falls below 50%.

However, excessive consent rights can also make future financing difficult.

The objective should be to preserve founder protection without making the company impossible to manage.

Board Representation Is Another Important Protection

Founders should also negotiate representation at management level.

A startup may have a five-member board consisting of:

• two founder representatives,
• two investor representatives,
• one independent director.

Alternatively:

• three founders,
• one investor,
• one independent director.

The appropriate structure depends on the investment.

What matters is that founders should not focus solely on the cap table.

A 25% shareholder with strong board representation may possess more practical influence than a 40% shareholder with no board rights.

Can Capital Increases Be Used to Force a Founder Out?

A genuine capital increase for legitimate financing purposes may dilute a founder who chooses not to participate.

However, using a capital increase primarily as an abusive mechanism to destroy a minority shareholder’s position raises different legal concerns.

The Turkish Commercial Code’s pre-emption protections are particularly relevant here.

For an A.Ş., Article 461 expressly prevents restriction or removal of subscription rights from being used to unjustifiably benefit or disadvantage a person.

For an Ltd. Şti., Article 591 contains a comparable principle.

Accordingly, the legality of a controversial capital increase should be analysed by examining:

• the genuine financing need,
• valuation,
• issue price,
• treatment of existing shareholders,
• reasons for limiting pre-emption rights,
• voting procedure,
• and whether particular shareholders have been unjustifiably favoured.

Down Rounds Are Particularly Dangerous for Founders

A down round occurs when a new financing takes place at a valuation below the previous round.

For example:

Seed valuation: EUR 5 million.

Series A valuation: EUR 15 million.

Emergency financing valuation: EUR 7 million.

This can create significant founder dilution.

The problem may become even more severe where earlier investors have anti-dilution protections.

Founders may face dilution from:

1. newly issued shares to the new investor; and
2. adjustments granted to existing investors under anti-dilution clauses.

Therefore, founders should model a hypothetical down round before signing the first institutional investment agreement.

If the founders do not understand what happens in a bad scenario, they do not fully understand the investment terms.

Convertible Instruments Can Cause Hidden Dilution

Not every future investor immediately receives ordinary shares.

Startups may use instruments that later convert into equity.

Depending on their legal structure, these may include:

• convertible loans,
• equity-linked contractual instruments,
• options,
• warrants,
• or other investment mechanisms.

These instruments can create hidden future dilution.

Suppose founders believe they own 80% of the startup.

However, several convertible instruments are outstanding.

When the next financing round occurs, those instruments convert.

The founders may suddenly discover that their actual fully diluted ownership is considerably below 80%.

For this reason, the cap table should always be examined on a fully diluted basis.

Founders Should Negotiate Pro Rata Participation Rights

Founders who expect to have financial resources available may negotiate contractual rights to participate in future rounds.

A pro rata right allows the holder to invest additional money to preserve a specified ownership percentage.

For example:

Founder owns 15%.

Company raises another round.

Founder may have the right to purchase enough new shares to remain at approximately 15%.

This can complement statutory pre-emption rights and may be particularly important where future financing instruments or transaction structures are more complex.

However, again, a pro rata right requires money.

It is a right to invest, not a right to receive free equity.

Founders Should Be Careful With Pay-to-Play Provisions

Some venture capital agreements contain pay-to-play mechanisms.

These provisions may penalise investors or sometimes other shareholders who refuse to participate in future financing rounds.

Possible consequences may include:

• loss of certain preferential rights,
• conversion of privileged shares,
• reduction of contractual protections,
• or other agreed economic consequences.

Such clauses can provide incentives for existing investors to continue supporting the startup.

However, they can also materially affect the balance between shareholders.

Their compatibility with the Turkish corporate structure must therefore be examined carefully.

Liquidation Preference Can Matter More Than Dilution

Founders often obsess over percentage dilution while ignoring liquidation preference.

This can be a serious mistake.

Suppose:

Founders collectively own 70%.

Investor owns 30%.

At first glance, founders may believe they will receive 70% of an eventual company sale.

However, the investor has a contractual liquidation preference.

If the company is sold for a relatively modest amount, the investor may first receive the amount required under the preference before the remaining proceeds are distributed.

Therefore, the founders’ 70% ownership does not necessarily mean they economically receive 70% of every exit.

This illustrates a broader principle:

The value of a share depends on the rights attached to that share, not merely the percentage written on the cap table.

How Can Founders Prevent Excessive Dilution?

There is no single legal mechanism.

A strong founder protection strategy normally uses several tools together:

• appropriate startup valuation,
• careful pre-money/post-money calculations,
• statutory pre-emption rights,
• contractual pro rata participation rights,
• reasonable option pool sizing,
• protection against excessive pre-money option pool expansion,
• founder approval for significant capital increases,
• restrictions on creating superior share classes,
• carefully negotiated anti-dilution formulas,
• founder board representation,
• reserved matters,
• voting privileges where appropriate,
• and accurate fully diluted cap-table modelling.

The goal should be to make future dilution predictable.

What Should Founders Negotiate in the Term Sheet?

The term sheet is where many dilution issues are first determined.

Founders should examine at least:

1. Pre-money valuation.
2. Post-money valuation.
3. Investment amount.
4. Investor ownership percentage.
5. Employee option pool percentage.
6. Whether the option pool is calculated pre-money or post-money.
7. Existing convertible instruments.
8. Anti-dilution provisions.
9. Future participation rights.
10. Liquidation preference.
11. Voting rights.
12. Board representation.
13. Reserved matters.
14. Founder vesting.
15. Drag-along provisions.
16. Tag-along provisions.
17. Rights concerning future share classes.
18. Founder consent for future capital increases.

The economic consequences should be modelled before the term sheet becomes commercially difficult to renegotiate.

Example: How a Founder Can Be Diluted Across Three Investment Rounds

Consider Founder A and Founder B.

At incorporation:

Founder A: 50%.

Founder B: 50%.

Seed Round

Investor receives 20%.

Founder A: 40%.

Founder B: 40%.

Seed Investor: 20%.

Employee Pool

A 10% option pool is created primarily by diluting existing shareholders.

Founder A: 36%.

Founder B: 36%.

Seed Investor: 18%.

Employee Pool: 10%.

Series A

Series A investor receives 25% of the post-money company.

Approximately:

Founder A: 27%.

Founder B: 27%.

Seed Investor: 13.5%.

Employee Pool: 7.5%.

Series A Investor: 25%.

The founders who originally owned 50% each now own approximately 27% each.

Have they lost?

Not necessarily.

If the startup was worth EUR 100,000 at incorporation but is now worth EUR 30 million, each founder’s 27% represents a theoretical value of approximately EUR 8.1 million before investor preferences and other adjustments.

Dilution should therefore always be analysed together with value creation.

Common Dilution Mistakes Made by Startup Founders

Several mistakes appear repeatedly.

The first is failing to calculate dilution before accepting an investment.

Other common errors include:

• negotiating only the headline valuation;
• confusing pre-money and post-money valuation;
• ignoring the option pool;
• calculating ownership without convertible instruments;
• waiving pre-emption rights too broadly;
• failing to model future investment rounds;
• accepting full-ratchet anti-dilution provisions without understanding them;
• ignoring liquidation preference;
• focusing only on percentage ownership rather than voting control;
• failing to protect board representation;
• failing to regulate future privileged share classes;
• failing to coordinate the shareholders’ agreement with the articles of association;
• and assuming that a majority shareholder may never be diluted.

The earlier these issues are addressed, the easier they are to manage.

Startup Equity Dilution Checklist

Before approving a financing round, founders should ask:

• What is my current ownership percentage?
• What is my fully diluted ownership percentage?
• What percentage will I own immediately after the investment?
• What happens after the employee pool is created?
• What happens if outstanding convertible instruments convert?
• Do I have pre-emption rights?
• Am I being asked to waive those rights?
• Is the waiver limited to this round?
• Do I have a pro rata right for future rounds?
• What happens in a down round?
• Does the investor have anti-dilution protection?
• Is it full ratchet or weighted average?
• Can new privileged shares be created?
• Who controls future capital increases?
• Will I retain a board seat?
• Which decisions require my consent?
• What liquidation preference applies?
• Can an investor force an exit?
• What percentage might I own after the next two financing rounds?

If these questions cannot be answered from the transaction documents and cap table, the dilution analysis is incomplete.

Conclusion: What Is Equity Dilution and How Can Startup Founders Prevent It?

Equity dilution in a funded startup occurs when new equity is issued and the percentage ownership of existing founders or shareholders decreases.

Dilution is not inherently harmful.

It is often the price founders pay for obtaining capital that allows a startup to grow much faster and become substantially more valuable.

The real danger is unplanned and uncontrolled dilution.

Turkish corporate law provides important statutory protections.

For joint stock companies, Article 461 of the Turkish Commercial Code gives shareholders proportional rights to subscribe for newly issued shares and permits restriction of those rights only within specified legal conditions. It also expressly prevents restrictions from being used to unjustifiably benefit or disadvantage particular persons.

For limited liability companies, Article 591 provides comparable proportional participation rights in capital increases and imposes safeguards concerning their restriction.

Turkish joint stock company law also permits privileged shares and voting privileges within statutory limits under Articles 478 and 479, making it possible in appropriate structures to distinguish between economic participation and corporate influence.

However, legislation alone cannot protect founders from every form of startup dilution.

Professional investment documentation should also address:

• valuation,
• employee option pools,
• pre-emption and pro rata rights,
• anti-dilution mechanisms,
• privileged share classes,
• voting rights,
• board representation,
• founder consent rights,
• liquidation preference,
• and future investment rounds.

Perhaps the most important principle is this:

Founders should not try to prevent all dilution. They should try to prevent dilution they have not understood, modelled or agreed to.

A founder who falls from 70% to 30% may still have achieved an extraordinary financial result if investment transforms a small startup into a highly valuable business.

By contrast, a founder may retain 45% of the shares and still discover that aggressive investor rights, liquidation preferences, voting structures and future financing terms have substantially reduced both control and economic value.

For this reason, founders should never evaluate an investment by asking only:

“What percentage am I giving the investor?”

They should also ask:

“What percentage will I own on a fully diluted basis?”

“What happens in the next investment round?”

“What happens if the next valuation is lower?”

“Who bears the employee option pool dilution?”

“Can I participate in future capital increases?”

“Will my voting and board rights survive dilution?”

“What will I actually receive if the startup is sold?”

These questions should be answered before the term sheet, investment agreement, shareholders’ agreement and capital increase documentation are finalised.

A properly structured financing round should provide investors with sufficient protection to justify their investment while leaving founders with enough ownership, economic incentive and corporate influence to continue building the company.

That balance is one of the central objectives of effective startup investment law in Turkey.