Question

Dilution: assume you invest $2,000 in a startup with a $2 million post-money valuation. Nine months later, that same startup issues 10% more equity ($400k) for new investors at a $4 million post-money valuation. What is the new value of your original investment?

Answer 1

The value of my investment will be changing in accordance with the valuation of company in regards to new investment post money valuation.

In this case, it can be seen that I have invested in the company at the valuation of 2 million dollars where as a company is issuing new security by value in itself at 4 million dollars.

So it can be easily interpreted that value of investment has completely doubled because the market capitalisation of company has doubled.

10% more equity has been issued so total number of shares would be 110%

My new value of original investment=amount of investment (company new value/company old value)

=2000*(4/1.1*2)

=3636.36