What Dragons' Den doesn't show you about the equity you give away

Watch enough pitches and the negotiation always looks the same: a founder offers a slice of equity, a Dragon counters, they land somewhere in the middle, everyone shakes hands. What the format doesn't have time to show is what that slice of equity actually costs over the following five or ten years, which is a very different question from what it's worth on the day.

Why the headline percentage is misleading

Ten percent given away at a low, early-stage valuation can end up being worth vastly more in absolute terms than the same ten percent given away two years later once the business has grown — and vastly more than the cash injection that bought it was actually worth to the business at the time. Equity is a claim on all future value, not just a stake sized to the size of the cheque.

Run the maths on a simple, illustrative example: give away ten percent for £50,000 when the business is valued at £500,000, and that stake barely moves if the business later sells for £5 million — it's now worth £500,000. The founder handed over half a million pounds of eventual value for fifty grand of cash today. That's not necessarily a bad trade, but it's a completely different number from the one that gets discussed on the day.

The real question isn't 'what's ten percent worth today'. It's 'what will ten percent be worth the day I finally sell, and would I rather have kept it and found the money another way'.

What it costs beyond the percentage

Equity investors, reasonably, usually want more than a passive stake — a voice in decisions, visibility into the numbers, sometimes a formal say over major moves like taking on debt or selling the business. That's not necessarily bad; a good investor's input can be worth more than their cheque.

But it's a real cost that the headline percentage doesn't capture, and it's worth being honest with yourself about whether you actually want a partner in the decisions, not just the cash. Founders who take investment purely for the money, without wanting the involvement that comes with it, often end up resenting a relationship they signed up for gladly on the day.

What the term sheet actually contains beyond the percentage

Board seats and information rights, veto rights over specific decisions — raising further funding, taking on debt above a threshold, sometimes even a founder's own salary — anti-dilution protection that can increase the investor's effective stake if a later round values the business lower, and drag-along or tag-along rights that affect what happens if the whole business is offered for sale later. None of these show up in the ninety-second television version, and all of them matter more, in practice, than the headline percentage agreed on the day.

There's also a structural factor that shapes many angel deals in the UK that rarely gets mentioned on screen: many investors, including some Dragons, structure their investment to qualify for SEIS or EIS tax relief, which offers meaningful income tax and capital gains benefits to the investor in exchange for backing smaller, earlier-stage UK companies. Qualifying for that relief can affect what kind of shares are issued and what rights come attached to them, which is one more reason the paperwork behind a simple percentage is rarely as simple as the number on screen suggests.

How dilution actually compounds across rounds

The ten percent given away on television rarely stays ten percent. Most growing businesses raise more than once, and each subsequent round dilutes everyone who isn't putting in new money — including the original Dragon, but also including the founder. A founder who starts with 100%, gives away 10% on the show, then raises a further round giving away another 20% to a new investor, isn't simply down to 70%; the maths compounds, and by a third round it's common for founders to be surprised how much of 'their' company they still technically own versus what they assumed going in. Modelling two or three realistic future rounds before accepting the first is a five-minute spreadsheet exercise that most founders skip entirely.

The non-dilutive routes worth checking first

Before assuming equity is the only realistic route to growth capital, it's worth checking what's available that doesn't cost a stake at all. R&D tax credits are a genuine, underused source of cash for UK businesses doing qualifying development work, even outside traditional tech. Asset finance and invoice finance can fund specific, identifiable needs — new equipment, the gap between issuing an invoice and getting paid — without touching ownership. None of these replace equity for a business that genuinely needs a large injection of patient capital and expert guidance, but for a narrower funding need, they're worth ruling out first, not treated as a fallback only considered after equity talks have already started.

The alternative nobody enjoys as much on camera

Debt, revenue-based financing, or simply growing slower on retained profit are all less exciting to pitch and to watch, and all leave you owning all of your own upside. None of that means equity is the wrong choice — sometimes it's genuinely the right one, particularly when the investor brings expertise or contacts the business genuinely can't get otherwise.

It means the decision deserves the same scrutiny as any other major, largely irreversible financial commitment, not the ninety-second version the format has time for. Before taking equity investment, it's worth actually modelling what that percentage could be worth at a realistic future valuation, not just what it feels like to accept today.

Common questions

How much equity should I expect to give away in a first raise?

Work backwards from the cash you actually need rather than starting from a percentage, because the percentage is an output, not a decision. Two structural thresholds should shape the answer: below 75% you can no longer pass a special resolution on your own, which covers changing the articles among other fundamental decisions, and below 50% you no longer control ordinary resolutions, including appointing and removing directors. A founder who gives away 30% in a first round and expects two more rounds is planning their own way below both. Raise the smallest amount that reaches a genuine milestone, not the largest anyone will offer, and model where the next two rounds leave you before signing.

What are SEIS and EIS, and how much can I raise under them?

They are UK tax reliefs that make investing in small, early-stage companies far more attractive, and most angel investment in Britain is structured to qualify for one of them. Under the Seed Enterprise Investment Scheme a company can raise £250,000 in total across its lifetime, with investors receiving 50% income tax relief on up to £200,000 invested in a tax year. The Enterprise Investment Scheme is the larger sibling: 30% income tax relief for investors on up to £1 million a year, and from 6 April 2026 a company can raise up to £10 million a year and £24 million over its lifetime, with double those limits for knowledge-intensive companies. Get advance assurance from HMRC before investors commit.

Can I raise money without giving away equity?

Often, for a smaller or more specific need. R&D tax relief is the most underused: the merged scheme gives a 20% above-the-line credit on qualifying development spend, and loss-making companies spending at least 30% of total costs on R&D can claim at 27% under Enhanced R&D Intensive Support. A Start Up Loan from the British Business Bank runs from £500 to £25,000 per founder, fixed at 7.5% since 6 April 2026, with no fees and twelve months of free mentoring. Invoice finance funds the gap between raising an invoice and being paid; asset finance funds specific equipment. None replaces a large injection of patient capital, but all deserve ruling out before equity talks start.

What actually happens to my stake when I raise again?

Everyone who does not put in new money gets diluted, including the investor who backed you first. Work an illustrative example: you start with 100%, give away 10% for £50,000 and hold 90%. Raise again a year later, selling 20% of the company to a new investor, and your 90% becomes 72% while the first investor's 10% becomes 8% — the new shares dilute you both proportionally. A third round on the same terms takes you to roughly 58%, below the 75% special-resolution threshold and uncomfortably close to 50%. That arithmetic takes five minutes in a spreadsheet and is the single most useful thing to do before accepting a first offer.

Can I buy an investor out later if it isn't working?

Only if they agree, or if the paperwork you signed gives you a route — which most standard investment agreements do not. A company can purchase its own shares, but it needs sufficient distributable profits or must follow a strict statutory procedure, plus shareholder approval and the correct Companies House filings, and none of that helps if the investor simply declines. This is the part to negotiate while you still have leverage: ask what happens if you want to part company, whether any buy-back mechanism exists, and on what valuation basis it would work. An investor is not a supplier you can switch. Assume the relationship is permanent and price the decision accordingly.