Pre/Post Money Question
How would you answer this question:
You are an investor, and own 20% of a start-up that is raising $20 million at a $100 million post-money valuation (identical security). We are not participating. What is the ownership after the round, and what is your ownership worth?
The new investor owns 20% on a post-money basis ($20M / $100M). All existing owners now only account for 80% of ownership, so everyone is diluted 20%. 80% of 20% is 16%, which is your new ownership %. That is worth $16M (16% of the $100M post-money).
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