And then the company will make a price tour. And then what happens to the capitalization table? And now I warn you. This starts to get into the math part of the whole thing, so turn on your brain and keep focusing. All right. So, induction. So say it`s a very simple company, there are two founders, and they share their shares equally between the two. So, in this example, each founder owns 4.625 million shares. Thus, a total of 9.25 million shares are issued and each founder holds 50%. It`s pretty simple, isn`t it? And at this point, in order for them to own these shares, the founders have done the paperwork, they have granted these shares through a limited share purchase agreement and there is an acquisition on these shares as was discussed with Carolyn earlier in the price.
All right. So the next thing that will happen is that this company raises money for a SAFE post-money, and they have collected from two investors. So the first investor comes in pretty early and they invest $200,000 at a valuation cap of $4 million after the money. And then, a little later, Investor B comes in and puts $800,000 at a valuation cap of $8 million after the money. So, if you remember our formulas, the property that investor A has at this point is the amount of money they have invested, divided by the post-money valuation cap that gives them 5% of the business. The same goes for investor B, 800,000 out of 8 million, which gives them 10% of the company. In total, the founders sold 15% of the company at that time. Even if it doesn`t change the actual capitalization chart because these are not shares at the moment, it`s just a SAFE, it`s just a promise to give shares in the future, the founders should know by this time that they have sold 15% of the company. And if they have sold 15% of the company, they can no longer own 100% of the company. Instead of the founders earning 100% of the company together, they have been diluted by the 15%, so that they fall to 85% of the company. So it`s important to have this in your brain when you`re raising money, because while the cap chart, as I said, doesn`t change, the fact that you just sold 15% of the business is an important fact and it`s an important thing to know because you want to make sure you don`t sell too much of the business. because you know there will be a lot of future fundraising that will work with the company and so there will be more dilution in the future.
Is everyone satisfied with how we have reached that 15%? Yes, the question. Y Combinator is always interested in resolving disputes amicably and efficiently, and most user concerns can be resolved quickly and to the user`s satisfaction by sending us an email to firstname.lastname@example.org. If these efforts prove unsuccessful, a party intending to seek arbitration must first send the other party written notice of the dispute (“Notice”) by registered mail. Notice to Y Combinator should be addressed to Y Combinator Management, LLC, 335 Pioneer Way, Mountain View, CA 94041 Attn: General Counsel (“Notice Address”). The notice must (i) describe the nature and basis of the claim or dispute and (ii) state the specific remedy sought. If Y Combinator and you do not resolve the claim within sixty (60) calendar days of receipt of the notice, you or Y Combinator may initiate arbitration. During the course of the arbitration, the amount of a settlement offer will not be communicated by Y Combinator or you to the arbitrator until after the arbitrator has determined the amount to which you or Y Combinator are entitled. Denny Miei`s advice to first reach a “meeting of minds” and express it in plain English is right, don`t rely on a lawyer to help you make a deal with a partner, rely on a lawyer to point out risks and issues you may not have considered (for example. B the establishment of a purchase and sale agreement). We have a standard agreement for all our investments. We are investing $125,000 in a simple “post-money” agreement for future equity and entering into an agreement with the Company and the Founders that sets out certain policies and rights specific to YC, including a right to invest in future rounds of financing of the Company (the “YC Agreement”). The advice of making an acquisition schedule (or buyback/unveiling) is also good.