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.
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.
