Comment on Investor Herd DynamicsparentComments−ganeumann13yThe money buys new shares in the company. Think about it in per share terms. In your example:- Pre-money there are 1,000 shares, valued at $1,000 each- The company sells 100 new shares for $1,000 each- Post-money there are 1,100 sharesSo after selling 100 shares, the original owner now owns 1,000/1,100 shares = 90.9%. The new valuation is 1,100 shares * $1,000/share = $1,100,000.−nadam13yNow everything is clear, thanks!
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The money buys new shares in the company. Think about it in per share terms. In your example:
- Pre-money there are 1,000 shares, valued at $1,000 each
- The company sells 100 new shares for $1,000 each
- Post-money there are 1,100 shares
So after selling 100 shares, the original owner now owns 1,000/1,100 shares = 90.9%. The new valuation is 1,100 shares * $1,000/share = $1,100,000.
Now everything is clear, thanks!