An Interest In:
Web News this Week
- March 28, 2024
- March 27, 2024
- March 26, 2024
- March 25, 2024
- March 24, 2024
- March 23, 2024
- March 22, 2024
October 13, 2011 07:35 pm GMT
Original Link: http://feedproxy.google.com/~r/Techcrunch/~3/qQ3HhUzJ6zc/
Understanding How Dilution Affects You At A Startup
Everybody knows that when you raise money at a startup your ownership percentage of the company goes down. The goal is to have the value of the startup go up by enough that you own a smaller percentage of a much larger business and therefore your total personal value goes up.The simplest way to think about this is: If you own 20% of a $2 million company your stake is worth $400,000. If you raise a new round of venture capital (say $2.5 million at a $7.5 million pre-money valuation, which is a $10 million post-money) you get diluted by 25% (2.5m / 10m). So you own 15% of the new company but that 15% is now worth $1.5 million or a gain of $1.1 million.But understanding how you're likely to get diluted over time is a more difficult concept. And figuring out how much your equity may be worth over the course of a 5-year stint at a startup is even more complicated. (Infographic after the jump)Original Link: http://feedproxy.google.com/~r/Techcrunch/~3/qQ3HhUzJ6zc/
Share this article:
Tweet
View Full Article
Techcrunch
TechCrunch is a leading technology blog, dedicated to obsessively profiling startups, reviewing new Internet products, and breaking tech news.More About this Source Visit Techcrunch