How do you model a private equity investment on a cap table when multiple rounds occur, and how does pre-money vs post-money affect ownership?

• A. Track each round's valuation, new equity issuance, and option pools. Pre-money vs post-money changes ownership percentages; reflect new investors' ownership while preserving existing holders’ economics
• B. Only track final round
• C. Pre-money vs post-money has no effect
• D. Ownership remains the same across rounds

Answer: (A)

When modeling a private equity investment across several funding rounds, you must track each round separately because ownership shifts with every infusion of capital and any change to the option pool. For every round, record the pre-money valuation, the amount raised, and whether the option pool is expanded as part of the deal. Then determine the post-money valuation (pre-money plus new money) and issue new shares to the incoming investors accordingly. The new investors’ ownership is based on that post-money calculation, which dilutes existing holders; you must update all holders’ percentages to reflect the fully diluted cap table after each round. Expanding the option pool adds more shares, further diluting everyone, so it’s essential to include that change as well. This approach shows exactly how ownership evolves over time and how pre-money versus post-money effects alter the share of the company that new investors receive; using post-money calculations is the standard way to allocate ownership in a new round and preserve the intended economics for existing holders. Skipping round-by-round tracking, ignoring the option pool, or assuming ownership stays the same across rounds would misstate dilution and investor stakes.