In a simple primary investment, post-money valuation equals pre-money valuation plus new investment. The new investor's percentage equals their investment divided by that post-money valuation. The result changes when the agreed calculation includes option-pool increases, convertible securities, secondary transactions or other adjustments.
A founder should therefore ask for the share-count calculation behind the percentage, not rely on a valuation headline alone.
Work through a simple round
Assume a company has 10,000 fully paid ordinary shares, all held by two founders. There are no options, convertible instruments or other securities. An investor agrees to invest ₹1 crore at a ₹4 crore pre-money valuation, with all of the money going into the company.
The price per share is ₹4 crore divided by 10,000 shares, or ₹4,000. The investor's ₹1 crore buys 2,500 new shares. After allotment, the company has 12,500 shares.
| Holder | Shares before | Shares after | Ownership after |
|---|---|---|---|
| Founder A | 6,000 | 6,000 | 48% |
| Founder B | 4,000 | 4,000 | 32% |
| New investor | 0 | 2,500 | 20% |
| Total | 10,000 | 12,500 | 100% |
The founders still hold the same number of shares, but their combined percentage falls from 100% to 80%. That reduction in percentage is dilution.
The post-money valuation is ₹5 crore. It is a negotiated transaction value under these assumptions, not the company's bank balance or a guarantee of its future sale price.
Keep face value separate from issue price
Assume each share in this example has a face value of ₹10. At an issue price of ₹4,000, the balance of ₹3,990 per share is premium. For the 2,500-share issue, the arithmetic is ₹25,000 of nominal share capital and ₹99,75,000 of premium.
The Companies Act treats securities premium separately from nominal share capital. [Source 1] A founder should not confuse a ₹1 crore investment with a ₹1 crore increase in paid-up nominal capital, or use authorised capital as the company's valuation.
Have the transaction team confirm the legal, valuation, accounting and filing treatment. The example explains the arithmetic; it is not a valuation report or an allotment instruction.
Ask what fully diluted means in your documents
A fully diluted cap table models ownership after specified potential share issues or conversions. Its inputs can include outstanding options, an unallocated option pool and convertible instruments, depending on the agreed definition.
Do not label a spreadsheet fully diluted without listing those assumptions. Record the source document for each potential entitlement and avoid counting the same option twice, once as a grant and again within the total pool.
If a term sheet says an employee pool must equal a particular percentage after the round but be included in the pre-money calculation, model the complete equation. Simply subtracting that percentage from the founders' current holding can give the wrong result. Ask who bears the dilution and whether the requested pool includes options already granted.
Distinguish new investment from a founder share sale
In a primary issue, the company issues new securities and receives the subscription proceeds. In a secondary sale, an existing shareholder sells existing securities and receives the sale proceeds.
Suppose the investor's headline cheque includes both components. Only the primary component is new money for the company. The ownership model and runway calculation must show the distinction.
Similarly, a transfer between two existing shareholders changes who owns the shares but does not, by itself, increase the total issued share count. A spreadsheet should identify the transaction type before calculating dilution.
Use the cap table as a record with evidence
Maintain an issued-share view and a clearly labelled fully diluted view. Show the date, share classes, holder names, issue or transfer history and assumptions. Reconcile these against the company's legal records and signed instruments.
Before sharing the model with an investor, check that totals equal 100%, share counts reconcile, rounding is explained and informal equity promises have been identified. If an entitlement is disputed or not implemented, describe its status rather than silently treating it as an issued share.
For non-resident investment, check the model against applicable pricing and instrument requirements. [Source 2]
Frequently asked questions
Does dilution mean my shares were taken away?
In the primary issue above, no. The founders retain their share numbers while the total number increases, reducing their percentage.
Is post-money valuation always pre-money plus the total cheque?
That formula works for the simplified primary round described here. Separate secondary consideration and check the agreed treatment of convertibles, pools and other adjustments.
Can I model a round before hiring advisers?
Yes. A transparent model helps you understand the proposed economics. Have the final assumptions and legal implementation checked before committing or issuing securities.
For employee-pool decisions, read our ESOP guide. Corpernicus provides cap table and shareholding support. Book an introductory call to discuss a proposed change.
Sources checked 29 September 2026
- Source 1: Companies Act 2013, section 52 on securities premium. All numerical examples above are original hypothetical calculations.
- Source 2: RBI Master Direction on Foreign Investment in India, pricing and permitted instruments.
General information. Simplified examples exclude taxes, transaction costs, differing class rights and instruments not expressly mentioned.