Round B
Let's assume that the same Widgets, Inc. gets the second round of financing, Round B. A new investor agrees to make a $20 million investment for 30 newly issued shares. If you follow the example above, it has 120 shares outstanding. Post-money valuation is:
- $20 million * (150 / 30) = $100 million
The pre-money valuation is:
- $100 million – $20 million = $80 million
The initial shareholders further dilute their ownership to 100/150 = 66.67%.
Read more about this topic: Pre-money Valuation
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