Rosalind Resnick is a New York-based freelance writer, entrepreneur, investor and author of The Vest Pocket Consultant's Secrets of Small Business Success.
In a second investment round, can the managing founder protect his equity in the company if he does not invest?
I am a manging founder and one of a group of first-round investors of a company building a restaurant chain. We are in the midst of raising capital for the first store. But if we need additional capital for a second store, I don't plan to invest again. Can I protect my equity or will it be diluted along with that of the other investors? If the second round investment is for a higher share value, is it common practice to give first-round investors a discount on reinvesting (besides their right to first refusal) or do they have to invest at the same value as the new investors?