It’s generally not a good idea for an initial investor to own more than 50% of a company (although there are always special exceptions), because the odds are that by the time the company is fully funded (and hopefully successful), the entrepreneur/founder’s equity will be reduced to such an extent that it will have effectively eliminated an incentive for him/her to continue building the company’s value.

In general, and in a more-or-less-ideal world, companies should be prepared to give up roughly 20%-40% of equity for each round of early financing, where the size of each round is enough for the company to increase its valuation significantly.

So, for example, taking a not-uncommon streamlined case of a company that had a seed round, a Series A and a Series B before being acquired (and for the purposes of this exercise disregarding any option pool), the math for a single-founder’s ownership of a startup would work like this based on giving up 20% each round:

After Founding: 100%
After Seed: 80%
After Series A: 64%
After Series B: 51%

…and like this based on giving up 40% for each financing round:

After Founding: 100%
After Seed: 60%
After Series A: 36%
After Series B: 22%

A really nice visual calculator for working all of this out can be found at:
http://www.ownyourventure.com/equitySim.html

*original post can be found on Quora @ : http://www.quora.com/David-S-Rose/answers *