A three-round cap table worked line by line, with the option pool created before each round, and the founders' stake after every step.
Founders' ownership after several rounds is the product of what each round leaves them, after the option pool top-ups that are carved out of the pre-money. On an illustrative company that raises a seed, a Series A and a Series B, the founders go from 100 per cent to 70.0, then 46.67, then 37.33 per cent after the Series B, two co-founders at 18.67 per cent each. The investors take 20, 25 and 20 per cent of each round; the option pool, not the investors, explains why the founders do not hold the 48.0 per cent that those three numbers alone would leave.
Worked in full in The Venture Capital Associate by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
Cap tables are where headline terms and economic reality part company. A Series A "at 30 million pre-money for 25 per cent" sounds like a 25 per cent dilution. For the founders here it is a third of their stake. The difference is mechanical and fully predictable from the term sheet, which is why an associate should be able to run it before the partner asks.
| Round | Raise | Pre-money | Post-money | Pool target |
|---|---|---|---|---|
| Seed | 2,000,000 | 8,000,000 | 10,000,000 | 10% |
| Series A | 10,000,000 | 30,000,000 | 40,000,000 | 15% |
| Series B | 25,000,000 | 100,000,000 | 125,000,000 | 12% |
Two founders start with everything, split equally, and there are no SAFEs or convertible notes outstanding. Each round's investors buy raise divided by post-money.
New investor share = raise / post-money. Pool top-up = pool target − old pool × (1 − new investor share). Existing holders share what is left, pro rata.
Excel, for the founders after a round, with their previous share in B2, the previous non-pool total in C2, the new investor share in D2, the old pool in E2 and the target in F2: =B2/C2*(1-D2-MAX(F2,E2*(1-D2))).
Seed. 2 million on 10 million post is 20.0 per cent. The 10 per cent pool is created pre-money, so it comes out of the founders alone: 100 − 20 − 10 = 70.0 per cent, worth 7.00 million at the seed price.
Series A. 10 million on 40 million post is 25.0 per cent. The existing 10 per cent pool is diluted to 7.5 per cent, so a 7.5 point top-up is needed to reach 15 per cent. That leaves 60 per cent for the founders and the seed investor, split 70 to 20: founders 46.67 per cent, seed 13.33 per cent.
Series B. 25 million on 125 million post is 20.0 per cent. The 15 per cent pool dilutes to exactly 12.0 per cent, the target, so no top-up. Everyone else is multiplied by 0.80: founders 37.33 per cent, worth 46.67 million at the Series B price.
| Holder | After seed | After Series A | After Series B |
|---|---|---|---|
| Founders | 70.00 | 46.67 | 37.33 |
| Seed investor | 20.00 | 13.33 | 10.67 |
| Series A investor | 25.00 | 20.00 | |
| Series B investor | 20.00 | ||
| Option pool | 10.00 | 15.00 | 12.00 |
| Total | 100.00 | 100.00 | 100.00 |
| Round | New investors take | Founders' stake falls by | Points lost |
|---|---|---|---|
| Seed | 20.0% | 30.0% | 30.00 |
| Series A | 25.0% | 33.3% | 23.33 |
| Series B | 20.0% | 20.0% | 9.33 |
Without any option pool the founders would hold 0.80 × 0.75 × 0.80 = 48.0 per cent. The pool costs them 10.67 points, as much as the seed investor ends up owning. The seed investor's own 20 per cent shrinks to 10.67, a retention of 53.3 per cent, which is why seed funds model their stake at exit, not at entry, and why the exit needed to return the fund is so large.
Fully diluted ownership counts the whole pool, granted or not. Founders also usually receive part of it over time, and unvested grants return to the pool when employees leave, so the 37.33 per cent is a floor on paper, not a forecast of what they will own at exit.
| Series A pre-money | Series A takes | Pool 10% | Pool 15% | Pool 20% |
|---|---|---|---|---|
| 20m | 33.3% | 33.3 | 32.1 | 29.0 |
| 30m | 25.0% | 38.2 | 37.3 | 34.2 |
| 40m | 20.0% | 41.1 | 40.4 | 37.3 |
Read across a row: a 20 per cent pool at a 40 million pre-money leaves the founders exactly where a 15 per cent pool at 30 million does, 37.3 per cent. Ten million of extra headline valuation buys nothing if the investor also asks for five more points of pool. Had the Series B also asked for a 15 per cent pool, a 3.0 point top-up, the founders would end at 35.7 per cent.
Multiply what each round leaves, and take each pool top-up out of the pre-money holders only. On this case three rounds that each sell 20 to 25 per cent leave the founders with 37.33 per cent, and 10.67 of the 62.67 points they gave up, about 17.0 per cent, went to the pool, not to an investor. The Venture Capital Associate covers the cap table and the conversion, headline against reality, and the free workbook for this case carries the stake from seed to exit through the rounds.
Illustratively, 15 to 25 per cent to the new investors in each priced round, plus any option pool top-up. In this example the investors take 20, 25 and 20 per cent, but the founders lose 30.0, 33.3 and 20.0 per cent of their stake, because the seed and Series A pools are carved out of the pre-money and fall on existing holders only.
Each round dilutes what is left, not the original 100 per cent. Adding 20, 25 and 20 per cent of new investors gives 65 per cent and suggests founders keep 35; multiplying 0.80, 0.75 and 0.80 gives 48.0 per cent before any pool. Adding overstates dilution by compounding the wrong way, and then the pool is usually forgotten in the other direction.
When the pool is created or enlarged in the pre-money, as most term sheets require, the existing shareholders pay for it and the new investor does not. At the Series A here the pool is topped up by 7.5 points to reach 15 per cent of post-money; founders and the seed investor absorb all of it in proportion to their holdings.
This article is one calculation from The Venture Capital Associate. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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