Startup ecosystem · Cap Table
Pre-money vs post-money: how dilution actually works
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Facts
Pre-money valuation: The company's value before new investment. Post-money = pre-money + investment amount.
Provisions and law
- Companies Act 2013, Sec 62 | FEMA RDB Rules
Analysis
Investor ownership % = Investment ÷ Post-money valuation. Example: ₹50Cr pre-money. ₹10Cr investment. Post-money = ₹60Cr. Investor owns 10÷60 = 16.7%. Founders are diluted from 100% to 83.3% (minus ESOP pool). The ESOP pool trick: If the 10% ESOP pool is created pre-investment, it comes out of the pre-money. Founders own (100% - 10% ESOP) × 83.3% = 75% post-round. If the ESOP pool is created post-investment, investors bear part of the dilution.
Conclusion
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