01 / UNDERSTAND THE CONCEPT
Work backwards from a target position.
At a given post-money valuation, the check size for an equity stake is simply the valuation multiplied by the target percentage. This gives an investment sizing reference for a primary financing.
The round’s total size and allocation still constrain what is available. A future ownership target also requires assumptions about dilution from subsequent financings and employee equity.
02 / THE MATHEMATICS
The formula, made clear.
Required investment = post-money valuation × target ownership
- Post-money valuation
- Value after all new primary investment in the round.
- Target ownership
- Desired fully diluted stake immediately after the round.
03 / A WORKED EXAMPLE
Put the numbers in context.
A 10% post-round position at a $10M post-money valuation requires a $1M check.
| Input | Example value |
|---|---|
| Post-money valuation | $10,000,000.00 |
| Target ownership | 10% |
| Required investment | $1,000,000.00 |
MODEL BOUNDARIES
What this calculation assumes
Equal price and share economics for the modeled primary investment. No transaction fees, preferences, secondary purchase or subsequent dilution.
FROM UNDERSTANDING TO ACTION
What to consider next.
Check the available round allocation and model potential dilution before setting an exit ownership assumption.
How we approach financial models →