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Second Round Finance
What does not confuse second stage investors or drive them away is the existence of employee share schemes. My Venture Capital colleague, Alan Barrell, firmly believes that second round (and beyond) investors expect there to be employee share incentives in place. Indeed, some venture capitalists will not consider companies that do not have employee share incentives in place.

In this regard, early stage investors should allow for enough shares to be earmarked for future employee participation. In particular, many start-up companies get to a stage where they need to recruit 'big hitters' for the senior management roles, such as Chief Executive, Sales & Marketing Director or Finance Director. Such people usually need a substantial tranche of the equity and early-stage investors should bear this in mind. At this stage it is not unusual for the employees' shareholding to be 15% of the company.

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