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What should my price per share be when I take an Instant Investment?

By setting the same price per share as your round, new investors get the same deal.

When raising via Instant Investment to top up a round, many founders choose to give their new investors the same deal as the investors in their last funding round. This can be done by maintaining the same price per share as the one in your funding round. The dilution effect will be constant and the company will end up giving away the same number of shares and shareholding percentage as in the Funding Round. However, some founders may opt for a higher price per share to reflect a higher valuation if they raise Instant Investment a while after the funding round.

Let's take a look at an example: 

Suppose your Cap Table looks like this after your Pre-Seed Round, in which your price per share was £9 at £1 million valuation, your round investors got 5% and 5,850 shares:

After the round closes an investor wants to invest and you take them on board on the same deal terms as in the Funding round, at the same price of £9. The pre-money valuation is different as the following formula calculates it: 

Pre-money Valuation= Total number of shares and options * Price per share. 

Pre-money Valuation = 116,961*9 =£1,052,650

Therefore, the new investor will come in at a higher pre-money valuation but also based on a higher Fully-diluted total, therefore the Price per share remains the same and this is your cap table now:

Now, a second instant investment comes in. Again, if you maintain the same Price per Share the Pre-money valuation of the second Instant investment is increased by the same amount (£10,000) that the first investor has committed, however, the Fully-Diluted total has also increased, hence the equation balances to the same price per share.

Pre-money Valuation= Total number of shares and options * Price per share. 

Pre-money Valuation = 118,072*9 =£1,062,650

The cap table will now look like this: 

Had those investors walked in during the round, the dilution effect would have been the same and the percentage of shareholding granted would also be exactly the same: 

Conversely, if you wanted to give away less equity and reduce dilution effects you can increase the Price per Share of the Instant Investment, to reflect a higher pre-money valuation. 

Finally, please be aware that the first investor’s Investment Agreement will not encapsulate the subsequent investments in the Investment Group: 

It is only the Instant Investment Agreement that was completed last, provided the previous Instant Investments have been marked as “Completed” that will encapsulate all of the investments and reflect the final Cap Table: