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How to use this explainer
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This explainer sheet contains dummy numbers around promoter shareholding, round constructs, valuation, etc. to help you understand through a example.
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Notes column contains important context + comments that help you understand the calculations in an easy way.
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Use the 'template' sheet to perform any actual calculations + refer to this sheet to follow along / in case of any doubts.
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Promoter shareholding (before any investment)
Notes
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Shareholder# of sharesholding %Let's assume a company has 3 founders - each with different shareholding. This will also help founders understand how they get diluted based on their starting shareholding in the company.
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Sourav4,500 45.0%
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Sachin3,500 35.0%
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Rahul2,000 20.0%
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Total10,000 100.0%
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Pre-investment cap table (creation of ESOPs)
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Shareholder# of sharesholding %Incoming investors require that they shall not be diluted for ESOP pool creation. Hence, founders need to carve out an ESOP pool before.

The # of shares for ESOP have to be arrived through trial and error since termsheet usually specifies the % of ESOP on a fully diluted basis (i.e. post investment). As a result, ESOP % in pre-investment has to be higher as it gets diluted down with the investors coming in.
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Sourav4,500 36.8%
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Sachin3,500 28.6%
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Rahul2,000 16.4%
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ESOP pool2,230 18.2%
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Total12,230 100.0%
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Pre-seed roundAmount (INR)Usually, termsheets specify the post-money valuation. In that case, the pre-money is calculated as the difference between post-money & investment amount. If the termsheet specifies the pre-money, then it makes the calculation more straightforward.

Share price (rounded to the nearest whole number) is calculated as pre-money valuation / # of outstanding shares before the round. Rationale here is that investors are issued new shares at that price for additional capital.
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Pre-money valuation205,000,000
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Investment amount45,000,000
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Post-money valuation250,000,000 0.18
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Per share price (INR)16,762
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Investor commitments
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InvestorAmount (INR)Example of a round construct of a pre-seed round: institutional fund leading the investment, a syndicate/micro VC and then a few angels. Use correct legal entity names of all investors since those go into the final docs.

Invesment amount in $$ adds a layer of calculation since it needs to be converted into INR. It's best to fix up an FX rate and use that consistently for all calculations. Convert $$ to INR, use INR for calculations regarding pre-money & per share price.
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Pre-seed lead25,000,000
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Syndicate12,500,000
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Angels7,500,000
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Total45,000,000
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Actual subscription amount & # of shares to be alloted
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Investor# of sharesactual amountFirst, we calculate the # of shares to be allotted to each investor basis their intended investment amount. Please keep in mind that fractional shares cannot be issued.

Then, the actual subscription amount is calculated as # of shares multipled by the per share price. Actual amount can differ slightly from intended amount because of rounding of share price & # of shares.
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Lead1,491 24,992,142
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Co-investor746 12,504,452
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Angels447 7,492,614
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Total2,684 44,989,208
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Post-investment cap table
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ShareholderEq sharesPref sharesTotal sharesholding %It is important for founders to understand how they get diluted. Essentially, the dilution comes from 2 sources - first is the creation of the ESOP pool and second is with the investors being allotted additional shares.

When doing calculations, it is always better to first calculate # of shares and then calculate holding %, directly calculating holding % runs the risk of not appropriately accounting for dilution due to issue of additional shares.

Given the example of the round construct, investors collectively hold about 18%, ESOP is at 15% and the founders collectively hold about 67%.

It's worth keeping in mind that promoters & ESOP have equity shares whereas investors have preference shares. It's possible that the share price for both are same.
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Sourav4,500 4,500 30.2%
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Sachin3,500 3,500 23.5%
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Rahul2,000 2,000 13.4%
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ESOP pool2,230 2,230 15.0%
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Pre-seed lead1,491 1,491 10.0%
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Syndicate746 746 5.0%
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Angels447 447 3.0%
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Total12,230 2,684 14,914 100.0%
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Seed roundAmount (INR)Let's say the company goes on to raise another round. Calculations for pre-money & per share price are done as shared earlier.
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Pre-money valuation611,000,000
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Investment amount139,000,000
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Post-money valuation750,000,000
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Per share price (INR)40,968
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Investor commitments
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InvestorAmount (INR)In this round, we've taken the construct as a new lead coming in, investing bulk of the capital, the lead investor from the previous round decides to exercise their pro-rata rights and a new fund comes in as a co-investor.

Angels and syndicates decide not to participate (make additional investment) in this round.
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Seed lead90,000,000
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Pre-seed lead14,000,000
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Co-investor35,000,000
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Total139,000,000
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Pre-investment cap table
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ShareholderEq sharesPref sharesTotal sharesholding %If there have been no changes to the capital structure, then post-investment cap table from previous round becomes the pre-investment cap table for this round.

If there have been any changes (such as to the ESOP pool or any share transfers or any other modifications to the capital structure), the pre-investment cap table should reflect that.
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Sourav4,500 4,500 30.2%
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Sachin3,500 3,500 23.5%
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Rahul2,000 2,000 13.4%
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ESOP pool2,230 2,230 15.0%
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Pre-seed lead1,491 1,491 10.0%
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Syndicate746 746 5.0%
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Angels447 447 3.0%
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Total12,230 2,684 14,914 100.0%
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Actual subscription amount & # of shares to be alloted
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Investor# of sharesactual amountAgain, the calculation regarding # of shares to be allotted and actual subscription amount is calculated as earlier.
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Lead (seed)2,197 90,006,696
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Lead (pre-seed)342 14,011,056
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Co-investor854 34,986,672
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Total3,393 139,004,424
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Post-investment cap table
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ShareholderEq sharesPre-seed CCPSSeed CCPSTotal sharesholding %After the second round of investment, let's take another look at the split of the shareholding and how the founders have been diluted.

First thing to understand is that any shareholders who do not invest additional money in any round get diluted. This includes founders, ESOP pool and any investors who don't participate in the round.

As a result, founders have been diluted to collectively own ~54.5%, ESOP has gone down to ~12.2% (even though # of ESOP shares available which can be allotted to employees are the same), syndicate and angels have also been diluted.

The other important thing to understand is that a new series of CCPS has been created which is issued to the investors of this round. Again, the share price for all shares might be same but there are different series since each of them carries differential rights.
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Sourav4,500 4,500 24.6%
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Sachin3,500 3,500 19.1%
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Rahul2,000 2,000 10.9%
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ESOP pool2,230 2,230 12.2%
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Seed lead2,197 2,197 12.0%
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Pre-seed lead1,491 342 1,833 10.0%
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Co-investor854 854 4.7%
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Syndicate746 746 4.1%
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Angels447 447 2.4%
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Total12,230 2,684 3,393 18,307 100.0%
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