Dead Equity: A Cap Table Red Flag
Feb 16, 2021
What is dead equity, and why is it such a red flag for potential investors? Brett Brohl, Managing Director of Techstars Farm to Fork Accelerator, explains.
Dead Equity. I've seen 100s of different cap tables, and the first red flag I always look out for is dead equity. Dead equity means equity owned by people no longer involved in building the business. Equity is an extremely powerful incentive, and if early on in the process, a significant amount of it is dead, that means that a much smaller number of shares are in the hands of people actually working on the startup. Not to mention the active problems dead equity can create. In this video, I'll share some of my experiences and how to avoid them. Spoiler alert: vesting schedules!
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About the Author
Brett Brohl
In addition to being the Managing Director of the Techstars Farm to Fork Accelerator, Brett Brohl is the Founder of Bread and Butter Ventures, an early stage venture capital fund. He is an experienced entrepreneur, investor, and mentor. He honed his startup skills as the CEO of multiple companies, leading three to exit. Brett publishes his tips and best practices for founders and investors on his YouTube channel, Brett’s Brain.
