The Initial Capitalization is how much stock a Company can legally issue under its initial Certificate of Incorporation. In general, the Company should authorize enough stock to issue to the Founders and initial service providers under the Equity Incentive Plan such that when you go to raise capital from investors, the price per share for the new stock sold to investors is about $1.00 per share. For example, if you’re raising $5,000,000 in Series Seed Preferred on a $10,000,000 pre-money valuation and there are 10,000,000 shares outstanding on a fully-diluted basis, then the price per share is $1.00 per share, you will issue 5,000,000 shares to the Series Seed investors, who will own about 33% of the corporation on a post-money basis.
Glossary