Question

Which of the following scenarios is the best for a startup’s founders in terms of ownership retained:

	A.	Premoney valuation of $5million, $1million investment, 15% postmoney option pool
	B.	Premoney valuation of $6million, $2million investment, 25% postmoney option pool
	C.	Postmoney valuation of $4million, $2million investment, no postmoney option pool
	D.	Premoney valuation of $4million, $2million investment, 5% postmoney option pool
	E.	Premoney valuation of $3million, $5million investment, no postmoney option pool

Answer 1

Share of Ownership retained can be found out by the below equation;

Ownership %= (Premoney Valuation- Postmoney valuation*Option pool percentage)/Postmoney valuation

A: Share of ownership retained= (5-6*15%)/6 =68.3%

B. Share of ownership retained= (6-8*25%)/8 =50%

C. Share of ownership retained= 2/4 =50%

D. Share of ownership retained= (4-6*5%)/6 =61.6%

E: Share of ownership retained= 3/8 =37.5%

From the options we can see that Option A has retained highest percentage of ownership