How Startup Equity Works
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Visual representation of dilutive effect on seed stage financings
![Seed Round 1 Liabilities+Equity Assets 900,000 Founders Shares IP (400K) Pre-Money 400K Pre-Money Shares 1m Post-Money 500K Post-Money Shares 1.25m 100,000 Option Pool Shares Angel A Investment (100K) 250,000 Angel A Shares ,[object Object]](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)
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How Startup Equity Works
- 1. Initial Structure Liabilities+Equity Asset IP 900,000Founders Shares Equity: Founder = 90% Employee Options = 10% Founding Sweat Equity Advisors Options Pool: 100,00 Shares
- 5. The New Shares Issued = Investment/Share Price $100,000/$.40=250,000 Total Shares Post-Money = 1,250,000 Equity = Pre-money Shares/Post-money Shares Founder: (900,000/1,250,000) = 72% Employee Options: (100,000/1,250,000) = 10% Angel A: (250,000/1,250,000) = 20%