3 ms·
No, 20% is correct. The share the investor gets is based on the post-money valuation, which is the pre-money valuation plus the amount of cash the company just
by othermaciej 16y ago
No, 20% is correct. The share the investor gets is based on the post-money valuation, which is the pre-money valuation plus the amount of cash the company just gained.
Working this example in more detail:
Pre-money valuation = $4 million
Cash invested = $1 million
Post-money valuation = pre-money + cash = $5 million
Proportion of post-money stock that's worth $1 million = $1 mil / $5mil = 20%
- staunch 16y agoAnd I thought that would never confuse me again...thanks. It's still a big return though, so I don't see the problem with valuations that high.
- timcederman 16y ago"They need 7/10" Not that the average is 7/10. That's the problem with these high valuations.
- zck 16y ago>And I thought that would never confuse me again...thanks. In things like this, it helps to scale it up to 100% -- what happens if a $4 million company takes $4 million from VCs? Certainly the VCs wouldn't own the entire company, so you can't give them a percentage based on premoney valuations.