Startup 131: Term Sheet Dilution Calculator

November 9, 2009 by Joseph Ansanelli
Filed under Dilution Calculator, Recent, Startups, Term Sheet

Well, it’s been a little long since my last post and I apologize. Life sometimes has a way of getting busy but it’s been great. Anyway, given all the interest and posts about Startup Term sheets, I thought it would be useful to share a tool that Charlie Fortenbach, Vontu’s head of finance and operations extraordinaire, created for calculating dilution at various stages of investments.

It’s an excel spreadsheet and fairly straight forward. Please consider it a beta release and we would love feedback, comments, bug fixes, and suggestions for improvement. Also, if you make changes, it would be great if you can send them back to me and then we can incorporate them for everyone.

The model is pretty simple to use. For a series A, simply follow the five steps below.

Enter the “Pre-money” valuation for the initial financing round (typically a seed round, or Series A venture round).
Enter the investment amount for each Series A investor. The spreadsheet will handle up to a total of four distinct investors (Investor AAA, Investor BBB, etc.). The model makes no assumption regarding pre-emptive investor rights, such as “pro-rata shares”.
Enter any issuance of Series A Preferred warrant shares. The issuance of warrants is typically associated with venture debt or convertible notes which is common in the early financing stages.
For the initial financing round, enter the % of total fully diluted stock (post-money) that will initially be apportioned to the employee option pool
Input the total “pre-money” stock fully diluted. Given the “Pre-money” valuation, this will set the Series A Preferred Price / sh. In the initial financing round the Preferred Price is generally driven to a round number, typically $1/sh. Certain adjusting splits may need to be applied to drive this price to $1/sh.

One piece of feedback we’ve already received is dealing with convertible notes and we’ll get to that eventually or if someone wants to update the sheet and send it back to me, that would be great.

Also, if you want to talk with Charlie, let me know and I can forward your info.

Enjoy. And if you like this, please share it with your friends using the add to any button below. And if you’d like an email or Twitter update on future posts, feel free to sign up for either.

Download Dilution Calculator

Related Posts and References