Seed Capital Defense Architecture: Dilution Math, Protective Covenants & Velocity Scoring
Mandate: When multiple SAFEs are issued across different valuation caps, founders unintentionally sell 30%–45% of their company before Series A. At Series A, lead VCs demand an unallocated 15% employee option pool created prior to investment, severely diluting early angel checks.
Mandate: Pitch decks correlate poorly with venture power-law returns. We combine Track 1: High-Velocity Capital (frictionless deployment, founder autonomy) and Track 2: Active Operational Co-Development (direct technical acceleration across AI & systems) backed by rigorous 72-hour execution velocity.
Require quarterly financial statements, cash burn rate, revenue breakdown, and cap table updates within 30 days of quarter end. Never invest blind.
Enforce contractual right to maintain ownership percentage in Series A and Series B. If growth leads attempt pay-to-play carve-outs, pool capital as a voting SPV.
| Metric | Formula | Hurdle Target | Red-Flag Threshold |
|---|---|---|---|
| Burn Multiple | Net Burn / Net New ARR | < 1.5x (Elite Capital Efficiency) | > 2.5x Burn |
| ARR / Headcount | Annual Run-Rate / Full-Time Team | > $180,000 / Employee | < $90k / Employee |
| Gross Margin | (Revenue - Direct Hosting/COGS) / Rev | > 75% for Pure Software / AI | < 60% Margin |
| Cash Runway | Cash in Bank / Monthly Net Burn | ≥ 18 Months Minimum | < 9 Months Left |