VC & PE Glossary
What Is Price Round Math?
Updated
Definition
Price round math is the cap table arithmetic for a priced equity financing—linking pre-money valuation, investment amount, fully diluted shares, and price per share to ownership outcomes.
Useful for: Founders, Investors
Price round math is the set of calculations that translate term sheet economics into a pro forma cap table for a priced equity financing.
How it works
Start with pre-money fully diluted shares—all common, preferred, options, warrants, and converting instruments. If the pool expands pre-money, increase share count before calculating price per share. Divide pre-money valuation by shares to get price; divide investment by price for new investor shares. Post-money shares equal pre-money plus new issuance; ownership is each holder’s shares divided by post-money total.
Convert SAFEs and notes at their caps and discounts. Reconcile with legal’s closing checklist—small rounding differences cause closing delays if not caught early.
Why it matters
- Founders: Run math before accepting term sheets; negotiate pool size with full dilution visibility.
- Investors: Verify pro-rata investment amounts and resulting ownership match fund model assumptions.
Common mistake
Calculating post-money ownership using pre-money share count without pool increase or SAFE conversion—everyone’s percentages shift at closing.
Related ideas
See post-money valuation, option pool shuffle, and cap table scenario.
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Common questions
Short answers for founders, LPs, and operators