Usually, at some point in your business’ life, you will be after investment. It can mean an exciting step forward for your business, and your team. But, as with many things in the entrepreneurial world, there are certain things you need to consider first. Particularly, how investment rounds will impact your equity.
To do this you first need to know the details of your shareholders and the number of shares they currently hold. Enter that in and the calculator will tell you what that means in terms of percentage.
Next, you add the details of your investment round. You need to know the percentage of new equity you will issue and the cost per share. Once you’ve entered that information, the calculator will tell you what that means in number of shares you’ll need to issue, and the amount of investment you’ll get in return.
You can add as many investment rounds as you want to see the impact of multiple rounds.
The final section of the calculator is the results. From the information you’ve entered the calculator can tell you how the investment rounds have impacted the percentage owned by your original shareholders and how many shares you need to distribute in return for the amount of investment you need.
Why is this calculator useful?
A. Hopefully, you’ve been a savvy and sensible business owner who has already shared ownership with your team and maintained an organised and flexible cap table, (if not, see our blog for how to become one!). This means you already have a structure with multiple shareholders and probably some of those are early investors.
So, when you go for another investment round and gain more shareholders, what happens to the shares the original shareholders have? Are they diluted? If so, by how much? And the even bigger question, what’s the impact of multiple investment rounds?
B. We’ve mentioned multiple investment rounds because it’s more than likely you’ll need more than one. But how many you need and at what price is a tricky set of calculations, that few have the time and patience for.
How can you work it out simply.
By using this calculator you can easily do two things.
Model existing share ownership and the impact of multiple future investment rounds on your equity (and that of other early investors).
Model the number of shares you will need to issue (and at what price) to achieve your overall investment requirements.