A: Each company's cash needs are different but here are general guidelines.
It's ok to dilute by 20% for your first $1.5m. You can get to that amount of dilution in different ways. For ex, $1.5m on a $6m capped note is 20%. (The dilution = Cash Invested / (Note Cap + Cash Raised). So $1.5m on a $6m capped note is $1.5m / $7.5m, or 20%).
The first cash is the hardest, and so that first $1.5m can also get to 20% total in an uneven way. For ex, you may do $250K at a $3m cap (7.7% dilution), then $500K at a $6m cap (7.7% dilution), then $750K at a $12m cap (5.9%) dilution. The total across these raises is slightly less than 20%. (Your dilution from subsequent rounds also dilutes the previous round's initial ownership).
One general rule is to dilute by 11% and then double your note cap. E.G., raise $750K on a $6m note, then double the cap to $12m and raise $1.5m, then double to $25m and raise $3m. Across these 3 rounds, you would have raised $5.25m and diluted by 29.5% in this scenario.
If you have push back from investors as you increase the cap through these raises, you can have the intermediary check split between the caps. For ex, let's say you close $300k on a $6m cap and then raise the cap to $9m and get push back from the next investor who wants to invest $50k that the cap was raised without a change to the fundamentals of the business. Explain the business has been de-risked b/c of the cash, but that if they can close soon you can split their $50k -- say $25k at 6 and $25k at 9 -- so their effective valuation is $7.2m -- and that way you can say that the most recent checks have come in at the new valuation, e.g. $9m.
Here's the layout we often see:
$100k friends and family at 1-3M cap - so ~5%
750k - 1m on 5M cap - ~15 %
2-4m on 8m pre - ~20%
This is everything going well throughout.
It is critical if you are using Post-Money SAFEs that you delete the section that says "Includes All Converting Securities" under Liquidity Capitalization. Otherwise, your SAFEs will not dilute by the subsequent SAFEs issued after it. The more recent Alchemist SAFEs should already haave this modification made. If you have questions about this, email us.