Valuation and dilution, round by round

Before a company has steady profits, there is little to discount, so valuations come from the market. Investors look at what similar companies raised at, your traction and team, and above all the size of round you need and the share of the company they expect for it. If a seed round of $4M is expected to buy about 20%, the post-money valuation is about $20M. That is why the round size and the target dilution usually move the price more than any spreadsheet.

For reference, Carta's 2026 medians were about $24M post-money at seed, $76M to $80M at Series A and roughly $165M to $190M at Series B, depending on the period and sector. Medians hide a wide spread, and AI companies have pulled them upward.

Post-money = pre-money + new money. New investors own their investment divided by the post-money. Raising $3M at a $12M pre-money gives a $15M post-money and 20% to the new investors. When you compare offers, compare post-money valuations and remember what else is inside the pre-money, especially a new option pool.

An illustrative company with a clean path: $1M of post-money SAFEs worth 10%, a seed round selling 20% with a 10% option pool created in the pre-money, a Series A selling 20% with a five-point pool top-up, and a Series B selling 13%. Real companies usually raise more along the way, which is why the median founding team holds about 36% after Series A, not the 47% shown here.

The founders sold 20% twice and 13% once, yet went from 100% to about 41%. The SAFEs and the option pool account for a large share of that. Rounded figures; extra SAFEs, bridges or a bigger pool push the result down quickly, so run your own numbers in the dilution simulator.

A new lead usually asks for an option pool big enough to cover hiring until the next round, created before their money goes in. Because it sits in the pre-money, the pool dilutes only the existing holders. Raising $3M at a $12M pre-money with a new 10% pool: the pool takes $1.5M of the $15M post-money, so the effective pre-money for everyone already on the cap table is about $10.5M. The best defense is a hiring plan that justifies a specific pool size.

When a round prices below the last one, earlier preferred investors' anti-dilution protection adjusts their conversion price, shifting extra dilution onto common stockholders. With the standard broad-based weighted average formula the effect is moderate; with a full ratchet it can be severe. Down rounds have run at about 12% to 13% of deals in Cooley's recent quarterly reports.

Investors buy preferred stock with rights that common stock lacks, so the 409A value of common stock, which sets employee option strike prices, is normally well below the preferred price. A new priced round is a material event: get a fresh 409A before granting more options.