Cap table scenario to minimize dilutive fundraising
I am working on a start up with some friends and am trying to model out a scenario for our cap table. Let's say we are taking in investment for the first time ever and that we are raising at a $10M valuation and are offering 20% equity for $2M in capital. Let's assume our valuation doubles in 12 months to $20M and we want to raise an additional $2M of capital but didn't want to dilute the early investors. Can we simply offer the second round investor capital from our 80% stake and retain the early investor's equity position without dilution? Does this ever happen in practice?