Jul 17, 2019 23:32:34

# VC - Calculating Ownership Quickly

When talking about terms with companies, it's important to keep ownership and dilution in mind on both sides.

I can use a calculator to figure out what those percentages might be but it's better to be quick at it.
Focusing on ownership, I am most likely calculating it by using the amount being raised and what post-money valuation might be.
For example, if a company is raising \$1M at \$4M post-money valuation then they are giving up 25% (\$1M/\$4M) of their company at that round.
Not including option pool, conversions into calculations at this time.
Then, if we are investing \$250K of that round, we own 6.25% (\$250K/\$4M) of the company.
So, how can I do \$250K/\$4M calculation faster without using a calendar?
This is how I am doing it-
25/4 = 6 something because 4×6=24
Then there is 1 left. 1/4 = .25
So it's 6.25
That was an easy one. Let's do another one.
Putting in \$300K into a \$5M post-money valuation.
30/5 = 6. So 6%
Another one-
Putting in \$350K into a \$6.5M post-money valuation
35/6.5 = 5 something because 6 × 5 = 30 but not more than 5.83 because 5/6. I don't really know how to calculate the exact decimal but that's good enough for that conversation.
One last one-
Putting in \$400K into a \$7.5M post-money valuation
40/7.5 = 7×6= 42 so less than 6% and probably closer to 5.5%

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