Can Founders Raise Capital Without Sacrificing Control?
Rundlet Advisory founder Travis Rundlet draws on legal and business experience to explain how poorly structured early raises can affect not just cap tables, but a founder’s ability to lead and grow the company on their terms.
At Rundlet Advisory, we counsel entrepreneurs building companies they intend to scale and lead with intention. In a recent article, we explored how LLC structures can offer a flexible alternative to traditional equity financing. This piece shifts focus to a related challenge: how early fundraising decisions, particularly those made without long-term planning, can quietly cost founders control of the companies they’ve built.
It’s a challenge we’ve helped founders navigate time and again. Our team brings experience not only in corporate law but in entrepreneurship, media, public policy, and finance—giving us a practical understanding of how strategy, structure, and governance intersect. With over 60 years of combined legal practice and more than $30 billion in closed deal value, we approach capital structuring as both legal advisors and business partners.
These aren’t just legal questions. They are strategic capital structure decisions. And they carry long-term implications for governance, financing, and control.
When founders lose control
The scenario is familiar: a founder raises early-stage capital without a forward-looking cap table strategy. When it comes time to raise again, perhaps from institutional investors, they realize that additional dilution will tip voting control to outside stakeholders.
In a corporation, shareholders elect the board. The board sets the direction of the company. If a founder no longer holds the majority of voting stock, they may lose the ability to shape strategy, manage leadership, or control future financings. We’ve worked with founders in this position. In some cases, they’ve had to negotiate buybacks or voting proxies. In others, the solution required a full recapitalization or reorganization of the company. These fixes are possible—but rarely efficient, and almost never ideal.
What experienced founders still overlook
Even second-time founders and seasoned operators can underestimate the compounding effects of governance terms. Many assume that majority equity automatically equates to long-term control. But in practice, board rights, preferred stock terms, and protective provisions often erode that control over time—especially when layered across multiple rounds. Others postpone structural decisions, thinking they can course correct later. But the deeper the cap table, the harder it becomes to make required changes.
Conversely, we’ve seen founders retain influence and flexibility with less than 50% ownership—because they retained certain voting rights and were economical in granting other control terms (like consent rights, board seats, board observer rights, etc.) rights from the outset. The difference isn’t always how much capital was raised. It’s often how the offerings were structured.
Control begins with financial planning
In our experience, many of these issues stem from a lack of forecasting. Too often, founders raise capital without modeling their financial needs beyond a rough estimate of burn rate.
We advise clients to build a detailed 12- to 18-month cash flow forecast. This model should include revenue assumptions, hiring plans, infrastructure costs, and product investment. From there, we assess not only how much capital is needed, but when it will be needed—and what forms of capital are appropriate at each stage.
That clarity informs the timing, size, and structure of the raise - and gives founders more leverage at the table. And, importantly, it helps founders ask and confidently answer one of the most important questions they can expect to get from prospective investors: how much capital do you need and why do you need it?
Capital always carries conditions
While economic dilution (the founder’s share in value) is typically the headline concern, control dilution (the founder’s ability to control the company) tends to be the more enduring constraint.
Even early-stage investors will often request board representation, approval rights, and other “protective provisions.” These terms rarely sunset, and they compound across rounds. Founders who overlook these details often find themselves outvoted or constrained at precisely the moment they need flexibility. We regularly help clients understand how these governance mechanics function in real-world transactions—and how to structure investor rights in ways that preserve the founder’s role as operator and decision-maker.
Can the damage be reversed?
Sometimes. We’ve advised clients through restructurings that include buybacks, investor exits, holding company rollups, or clean-slate mergers. When early investors are aligned and cooperative, these options can restore governance clarity and create space for future capital. But in many cases, the ability to restructure depends on negotiating leverage, financial runway, and investor trust. All are harder to secure once problems are already entrenched.
If you're navigating capital decisions, whether planning a raise or reassessing your structure, this is the right moment to think carefully about control, governance, and long-term flexibility.
We work with founders who want to structure early decisions with the future in mind. If this resonates, we’re always open to a conversation.
