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Capital & valuation
Dilution
Selling new shares reduces every existing owner's percentage. Raising $2M at an $8M pre-money valuation gives the investor 20% and leaves existing holders with 80% of a bigger company.
Owned by: VP / CFOTest band: VP / CFO
The formula
Post-money = Pre-money + Raise; Investor % = Raise ÷ Post-money
In practice
Dilution is fine when the money grows the pie faster than it shrinks the slice. Model the founder's stake through the next two rounds, not just this one.
The kind of thing the test asks
- Raising $2M at an $8M pre-money valuation gives the investor…
More in capital & valuation
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