Size of the Slices

Investment Size

At the same valuation, a larger investment is going to get a bigger chunk of the company, but it is also going to increase the post-money valuation dollar for dollar that is invested. We can use the same graphical example for this as we did for Pre-Money Valuation:

Pre-Money Valuation Example

Option Pool Creation

The other term that directly affects the size of each slice of the pie is how the Option Pool is created.

The Option Pool is a set of shares set aside for Option Grants, usually used as an incentive for employees to tie part of their longer term compensation to the success of the company.

There are two ways to create an option pool during a round of financing. The first is to create the pool from the Pre-Money Side, which means the new shares for the option pool are only diluting existing shareholders and not the new investment. The second is to create it from the Post-Money Side so the dilution is shared between existing shareholders and the new investments.

Option Pool Creation Example

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