Cap Table Scenario Modeler for Founders

Executive Summary

The $5M Series A at a $20M pre-money valuation implies a

$25M post-money valuation and gives the new investor

20% of the fully diluted company. The VC also requires a 10% post-money option pool. Because that pool is carved out of the pre-money, existing holders absorb all of its dilution. The effective pre-money valuation for current shareholders is really

$17.5M, not $20M.

Founders go from

80% to 56.0%. Without the pool they would hold 64%, so the pool alone costs founders

8 percentage points. Seed investors go from 20% to

14.0%.

Assumptions: no existing option pool, no SAFEs or convertible notes, and the pool is created before the round closes (the standard "option pool shuffle"). Share counts are rounded to whole shares.

The Math & Intermediate Steps

• Pre-Money Valuation: $20,000,000
• Investment Amount: $5,000,000
• Post-Money Valuation: $20M + $5M = $25,000,000
• Ownership targets (post-money, fully diluted):
  • Series A investor: $5M ÷ $25M = 20%
  • New option pool: 10%
  • Existing holders (founders + seed): 100% − 20% − 10% = 70%
• Post-money fully diluted shares: 10,000,000 ÷ 0.70 = 14,285,714
• Option Pool Refresh: 14,285,714 × 10% = 1,428,571 new pool shares
• New Shares Issued (Series A): 14,285,714 × 20% = 2,857,143 shares

Price Per Share: Pre-money ÷ pre-money fully diluted shares (including the new pool) = $20,000,000 ÷ (10,000,000 + 1,428,571) =

$1.75

• Check: 2,857,143 × $1.75 = $5,000,000 ✔
• Check: 14,285,714 × $1.75 ≈ $25,000,000 ✔

Cost of the pool shuffle: the 1,428,571 pool shares × $1.75 =

$2.5M of the "$20M pre-money" is the pool. Existing holders' shares are worth 10,000,000 × $1.75 =

$17.5M.

• For comparison, no pool: price would be $2.00, new shares 2,500,000, founders 64.0%.

Cap Table: Before & After

Before Series A

After Series A

Negotiation Playbook

Right-size the option pool to an actual hiring plan: A 10% pool is a default, not a requirement. Build a bottom-up plan of hires for the next 18-24 months. If it supports a

7% pool, founders land at

58.4% (+2.4 points), and the price per share rises to about $1.83. Each point of pool costs founders roughly 0.8 points of ownership. Counter-offer framing: "We've mapped every planned hire through the next 18 months, and that requires 7% of the post-money. Sizing the pool to the plan means we're not over-diluting everyone before the next round."

Push for part of the pool to sit post-money: Because the pool is in the pre-money, the VC gets its full 20% at the expense of existing holders. If the pool were instead created after the investment, it would dilute everyone. Founders would hold

57.6% (+1.6 points) and the VC would hold 18%. Even a compromise, such as half the pool pre-money and half post-money, helps. Counter-offer framing: "We're fine with a pool, but we'd like it to dilute all shareholders, including the new investor, since they benefit from the hires it funds."

Negotiate the pre-money valuation: Moving from $20M to

$24M pre-money (post-money $29M) cuts the VC to 17.24% and lifts founders to about

58.2% (+2.2 points), holding the 10% pool constant. Use the effective pre-money ($17.5M) as the anchor, as it's the number that shows the real price. Counter-offer framing: "After the pool, your effective pre-money is $17.5M. Given our growth and comparable rounds, we're at $24M headline, so the effective valuation lands closer to where the business is."

4. Hold the line on a 1x non-participating liquidation preference: The terms don't specify this, so confirm it in the term sheet. On a $50M exit, a 1x non-participating preference pays the VC

$10M (the greater of $5M back or 20% as-converted). A participating preference pays

$14M ($5M plus 20% of the remaining $45M), which is $4M shifted away from common holders. Counter-offer framing: "We're aligned on a standard 1x non-participating preference. Participation would misalign incentives at moderate exit values."

I'm not a lawyer or financial advisor. Have your startup counsel review the actual term sheet, especially on pool mechanics, since the exact wording changes the numbers above.