Clint called from L.A. and explained that his company would be raising as little cash as possible in the first round. He wanted the percent to be owned by the investors to be as small as possible. After he explained the status of his bootstrap (it has started shipping product), I gave him the following tip.
"Research has shown you'll give up the same percentage in spite of asking for more cash." I know that sounds impossible, but it's how things work out in VC land. First-time founders ask for too little cash. That reduces the number of VCs interested in the deal. With less competition for the deal the founder finds he gets less cash for the same percentage he planned on giving up.
The more cash a VC can put into a company the happier he is. It's how he scales his business. There are only about five to seven boards that a VC has time to be on. So he wants to maximize his time by investing as much cash as possible per board seat.
BOTTOM LINE: Ask for a lot of cash in your early round. You'll attract more investors to compete for your deal. That will increase your valuation and will get more cash for the percentage you give up. It's how the real world works.