The Equation Series
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Part II: The Investment Process

Chapter 7

Valuation, Cap Tables, and Dilution

Venture valuation is not discounted cash flow. It is a negotiated price per share for a security that carries preferences, usually set by working backward from a hoped-for exit and the ownership the investor needs, and then diluted by every later round.

The preview ends here. The full chapter is in the book.

In this chapter

  1. 7.1Pre-money, post-money, and price per share
  2. 7.2The option pool shuffle
  3. 7.3SAFEs and notes
  4. 7.4Dilution compounds
  5. 7.5The VC method