Equity Stake — How Much Are You Really Giving Up?

The investment amount is the capital investors commit. The equity stake is the ownership percentage they receive in return. These two numbers — and the valuation they imply — are the foundation of every term sheet.

The Core Maths

Post-Money Valuation = Pre-Money Valuation + Investment Amount

Equity Stake = Investment Amount ÷ Post-Money Valuation

Example: Pre-money of INR 80Cr, investment of INR 20Cr → post-money of INR 100Cr → investor receives 20%.

Why It Matters

• Dilution: Every rupee raised at a given valuation dilutes existing shareholders. The lower the valuation, the more you give away.
• Future rounds: Your current valuation sets the benchmark. A down round triggers anti-dilution provisions and compounds founder dilution.
• ESOP impact: The option pool is typically set pre-money — founders bear its dilution before the investor comes in.

Common Pitfalls

• Non-dilution clauses: Some investors push for guaranteed ownership across future rounds. Avoid. This locks in extreme dilution for all other shareholders.
• Insufficient runway: Raising too little forces you back to market sooner, increasing total dilution over the company's life.
• Overvaluation: A high early valuation is difficult to grow into and makes a down round more likely.

Evolv's Recommendations

• Research comparable valuations for your stage and sector before negotiations.
• Always calculate your post-investment ownership on a fully diluted basis.
• Model the ESOP pool impact before agreeing to its size and timing.
• The quality of the investor matters as much as the valuation.

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