Startups Stack Exchange Archive

Different type of investment deals

This Y Combinator page names 4 example deals:

What is the difference between these deals?

Answer 4005

  1. $100k at $5 million pre-money.

    Your company is worth $5M you take $100k now your company is worth $5.1M

    • Investor owns 1.96% ($100k at $5.1M valuation)
    • You own 98.04%

  2. $100k at a $5 million cap.

    You & the investor don’t know the value of the company. So the investment doesn’t have a % specified yet and the % will be specified on your next round of investment.

    You get $100k(seed) from investor A at a valuation X which will be determined later. If you work meh for 10 months and get series A from investor B $200k at a valuation of $3M.

    • Investor A will own 3.33% ($100k at $3M valuation)
    • Investor B will own 6.66% ($200k at $3M valuation)
    • You will own 90%

    If you work really well and get series A from investor B $1M at a valuation of $10M (you have gone over your cap $5M)

    • Investor A will own 2% ($100k at $5M valuation)
    • Investor B will own 10% ($1M at $10M valuation)
    • You will own 88%

  3. $100k uncapped

    You get $100k from investor A, work for sometime. When you get series A for $900k for $10M valuation.

    • Investor A will own 1% ($100k at $10M valuation)
    • Investor B will own 9% ($900k at $10M valuation)
    • You will own 90%

  4. $100k uncapped with a %10 discount.

    You get $100k from investor A, work for sometime. When you get series A for $900k for $10M valuation.

    • Investor A will own 1.11% ($100k at $9M valuation)
    • Investor B will own 9% ($900K at $10M valuation)
    • You will own 89.89%

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