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VCIC Math Help Deck

This deck provides assistance in understanding and calculating pre-money valuation, investment amounts, post-money valuation, share price, number of shares assigned, and ownership percentages in different investment rounds.

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VCIC Math Help Deck

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  1. VCIC Math Help Deck ©2013 Patrick Vernon

  2. Up Round: 1on1, 2on3 1 2 3 4 5 Series A • Negotiate pre-money valuation and investment amount • Pre + investment = post-money valuation • Choose share price ($1) • Calculate number of shares assigned • Owned/total shares = % ownership Series A 5 1 4 Ownership VC: 1M/2M = 50%Founders: 1M/2M = 50% 3 Inv = $1M 1M VC Shares $1 Shares Negotiated Pre = $1M 1M Founder 2 Post = $2M 2M Shares

  3. Up Round: 1on1, 2on3 1 2 3 4 Series B 5 Series B • Negotiate pre-money and investment • Pre + invest. = post-money valuation • Calculate new share price(pre-money B divided by A total shares) • Calculate number of shares assigned • Owned/total shares = % ownership 1 4 1.3MVC Inv = $2M $1.50 Series A 3 2MSeries A 1M VC 1M Founder Pre = $3M Shares Negotiated These two set the price 3÷2=$1.50 Inv = $1M 1M VC $1 Shares Negotiated Pre = $1M 1M Founder 2 Post = $2M 2M Shares Post = $5M 3.3M Shares 5 3 Ownership VC: 2.3M/3.3M = 70%Founders: 1M/3.3M = 30% B Pre $3M 2M Shares Multiplier: 1.5X

  4. Up Round: 2on4, 12on12 1 2 3 4 5 Series A • Negotiate pre-money valuation and investment amount • Pre + investment = post-money valuation • Choose share price ($1) • Calculate number of shares assigned • Owned/total shares = % ownership Series A 1 4 Inv = $2M 2M VC 5 Ownership VC: 2M/6M = 33%Founders: 4M/6M = 67% 3 Pre = $4M 4M Founder Shares Negotiated Shares $1 2 Post = $6M 6M Shares

  5. Up Round: 2on4, 12on12 1 2 3 4 Series B 5 Series B • Negotiate pre-money and investment • Pre + invest. = post-money valuation • Calculate new share price(pre-money B divided by A total shares) • Calculate number of shares assigned • Owned/total shares = % ownership 1 4 6MVC Inv = $12M $2 Series A 3 Inv = $2M 2M VC Shares Negotiated Pre = $12M 6MSeries A 2M VC 4M Founder These two set the price 12÷6=$2 Pre = $4M 4M Founder Shares $1 2 Post = $24M 12M Shares Post = $6M 6M Shares 5 3 Ownership VC: 8M/12M = 67%Founders: 4M/12M = 33% B Pre $12M 6M Shares Multiplier: 2X

  6. Down Round: 1on1, 1on1.5 1 2 3 4 5 Series A • Negotiate pre-money valuation and investment amount • Pre + investment = post-money valuation • Choose share price ($1) • Calculate number of shares assigned • Owned/total shares = % ownership Series A 5 1 4 Ownership VC: 1M/2M = 50%Founders: 1M/2M = 50% 3 Inv = $1M 1M VC Shares $1 Shares Negotiated Pre = $1M 1M Founder 2 Post = $2M 2M Shares

  7. Down Round: 1on1, 2on1.5 1 2 3 4 5 Series B • Negotiate pre-money and investment • Pre + invest. = post-money valuation • Calculate new share price(pre-money B divided by A total shares) • Calculate number of shares assigned • Owned/total shares = % ownership Series B 1 4 Series A Inv = $2M $0.75 2.7M VC 3 Inv = $1M 1M VC Negotiated Shares $1 These two set the price 1.5÷2=.75 Pre = $1.5M 2M 1M VC 1M Founder Shares Pre = $1M 1M Founder Post = $2M 2M Shares 2 Post = $3.5M 4.7M Shares 3 Ownership VC: 3.7M/4.7M = 79%Founders: 1M/4.7M = 21% B Pre $1.5M ÷ 2M Shares Multiplier: .75X

  8. Practice • 1 on 3, 3 on 10 • 3 on 3, 5 on 8 • 2 on 1, 3 on 6, 10 on 15 • 1 on 1, 4 on 2 • 3 on 5, 5 on 5

  9. Negotiate Pre and Inv • Pre + inv. = post-money • Share price • Calculate shares • % ownership 1 on 3, 3 on 10 • $1 inv on $3 pre • $1 + $3 = $4 post • $1 • 1M VC, 3M FounderTotal = 4M shares • VC 1÷4 = 25%Founder 3÷4 = 75% • $3 inv. on $10 pre • $3 + $10 = $13 post • $10 pre ÷ 4M shares = $2.5/share • $3 inv. ÷ $2.5 = 1.2M new shares for VCTotal shares 5.2M • VC 1.2+1=2.2÷5.2=42%Founder 3÷5.2=58%

  10. Negotiate Pre and Inv • Pre + inv. = post-money • Share price • Calculate shares • % ownership 3 on 3, 5 on 8 • $3 inv on $3 pre • $3 + $3 = $6 post • $1 • 3M VC, 3M FounderTotal = 6M shares • VC 3÷6 = 50%Founder 3÷6 = 50% • $5 inv. on $8 pre • $5 + $8 = $13 post • $8 pre ÷ 6M shares = $1.3/share • $5 inv. ÷ $1.3 = 3.8M new shares for VCTotal shares 9.8M • VC 3.8+3=6.8÷9.8=69%Founder 3÷9.8=31%

  11. Negotiate Pre and Inv • Pre + inv. = post-money • Share price • Calculate shares • % ownership 2 on 1, 3 on 6, 10 on 15 • $2 inv on $1 pre • $2 + $1 = $3 post • $1 • 2M VC, 1M FounderTotal = 3M shares • VC 2÷3 = 67%Founder 1÷3 = 33% • $3 inv. on $6 pre • $3 + $6 = $9 post • $6 pre ÷ 3M shares = $2/share • $3 inv. ÷ $2 = 1.5M new shares for VCTotal shares 4.5M • VC 1.5+2=3.5÷4.5=78%Founder 1÷4.5=22%

  12. Negotiate Pre and Inv • Pre + inv. = post-money • Share price • Calculate shares • % ownership 2 on 1, 3 on 6, 10 on 15 • $10 inv. on $15 pre • $10 + $15 = $25 post • $15 pre ÷ 4.5M shares = $3.33/share • $10 inv. ÷ $3.33 = 3M new shares for VCTotal shares 7.5M • VC 6.5÷7.5=87%Founder 1÷7.5=13%

  13. Negotiate Pre and Inv • Pre + inv. = post-money • Share price • Calculate shares • % ownership 3 on 5, 5 on 5 • $3 inv on $5 pre • $3 + $5 = $8 post • $1 • 3M VC, 5M FounderTotal = 8M shares • VC 3÷8 = 37.5%Founder 5÷8 = 62.5% • $5 inv. on $5 pre • $5 + $5 = $10 post • $5 pre ÷ 8M shares = $0.625/share • $5 inv. ÷ $.625 = 8M new shares for VCTotal shares 16M • VC 8+3=11÷16=69%Founder 5÷16=31%

  14. Negotiate Pre and Inv • Pre + inv. = post-money • Share price • Calculate shares • % ownership 1 on 1, 4 on 2 • $1 inv on $1 pre • $1 + $1 = $2 post • $1 • 1M VC, 1M FounderTotal = 2M shares • VC 1÷2 = 50%Founder 1÷2 = 50% • $4 inv. on $2 pre • $4 + $2 = $6 post • $2 pre ÷ 2M shares = $1/share • $4 inv. ÷ $1 = 4M new shares for VCTotal shares 6M • VC 4+1=5÷6=83%Founder 1÷6=17%

  15. Practice • 1 on 2 with 20% option pool • 2 on 4 with 10% option pool • 3 on 3 with 5% option pool

  16. Negotiate Pre and Inv • Pre + inv. = post-money • Share price • Calculate shares • % ownership 1 on 2 w/20% option • $1 inv on $2 pre • $1 + $2 = $3 post • $1 • 1M VC, 2M Founder, Total = 3M shares • VC 1÷3 = 33%, Founder 2÷3 = 67% • Option Pool 20% out of Founder, now 47%

  17. Negotiate Pre and Inv • Pre + inv. = post-money • Share price • Calculate shares • % ownership 3 on 3 with 5% option • $3 inv on $3 pre • $3 + $3 = $6 post • $1 • 3M VC, 3M Founder, Total = 6M shares • VC 3÷6 = 50%, Founder 3÷6 = 50% • Option Pool 5% out of Founder, now 45%

  18. Negotiate Pre and Inv • Pre + inv. = post-money • Share price • Calculate shares • % ownership 2 on 4 with 10% option • $2 inv on $4 pre • $2 + $4 = $6 post • $1 • 2M VC, 4M Founder, Total = 6M shares • VC 2÷6 = 33%, Founder 4÷6 = 67% • Option Pool 10% out of Founder, now 57%

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