The first time an investor offers you money “at a valuation”, the maths can feel slippery. It is not. Four definitions and some multiplication cover most of what you need. This guide walks you through them with a hypothetical example in PKR, so you can check any offer yourself and see how much of your company you will own after each round.
This is general information, not legal or tax advice. The company, founders and numbers in the example are hypothetical.
Four definitions
- Pre-money valuation: what the company is valued at just before the new money comes in.
- Post-money valuation: the pre-money valuation plus the new investment.
- Price per share: the pre-money valuation divided by the number of shares before the round, counted on a fully diluted basis.
- Investor’s ownership: the investment divided by the post-money valuation.
Fully diluted means counting every share that exists or has been promised: issued shares plus options and other rights to receive shares. Always ask whether a valuation is quoted on a fully diluted basis.
Dilution is the fall in your percentage when new shares are issued. You still own the same number of shares, but they are a smaller slice of a company that is, ideally, worth more.
Starting point: the founders
Two founders, Founder A and Founder B, incorporate a private limited company in Lahore. The company issues 800,000 shares: 480,000 to Founder A (60%) and 320,000 to Founder B (40%).
Round 1: an angel invests PKR 10 million
An angel investor agrees to invest PKR 10 million at a PKR 40 million pre-money valuation.
- Post-money valuation: PKR 40 million + PKR 10 million = PKR 50 million.
- Angel’s ownership: 10 ÷ 50 = 20%.
- Price per share: PKR 40,000,000 ÷ 800,000 shares = PKR 50.
- New shares issued: PKR 10,000,000 ÷ PKR 50 = 200,000.
- Total shares after the round: 1,000,000.
| Shareholder | Shares | Ownership |
|---|---|---|
| Founder A | 480,000 | 48% |
| Founder B | 320,000 | 32% |
| Angel | 200,000 | 20% |
| Total | 1,000,000 | 100% |
Founder A’s stake fell from 60% to 48%. Every existing holder was diluted by the same proportion: one fifth of their percentage.
Round 2: a seed round, with and without an option pool
A year later, a seed fund offers PKR 60 million at a PKR 240 million pre-money valuation. The post-money valuation is PKR 300 million, so the fund will own 20%.
Version 1: no option pool
- Price per share: PKR 240,000,000 ÷ 1,000,000 shares = PKR 240.
- New shares issued: PKR 60,000,000 ÷ PKR 240 = 250,000.
- Total shares after the round: 1,250,000.
| Shareholder | Shares | Ownership |
|---|---|---|
| Founder A | 480,000 | 38.4% |
| Founder B | 320,000 | 25.6% |
| Angel | 200,000 | 16.0% |
| Seed fund | 250,000 | 20.0% |
| Total | 1,250,000 | 100% |
Version 2: an option pool created before the round
Now the fund asks the company to reserve 200,000 shares for future employees and to count that pool in the pre-money valuation.
- Fully diluted shares before the round: 1,000,000 + 200,000 = 1,200,000.
- Price per share: PKR 240,000,000 ÷ 1,200,000 = PKR 200.
- New shares issued: PKR 60,000,000 ÷ PKR 200 = 300,000.
- Total fully diluted shares: 1,500,000.
| Shareholder | Shares | Ownership |
|---|---|---|
| Founder A | 480,000 | 32.0% |
| Founder B | 320,000 | 21.3% |
| Angel | 200,000 | 13.3% |
| Option pool | 200,000 | 13.3% |
| Seed fund | 300,000 | 20.0% |
| Total | 1,500,000 | 100% |
Percentages are rounded. The headline valuation is the same in both versions: PKR 240 million pre-money. But the price per share falls from PKR 240 to PKR 200, and Founder A ends with 32.0% instead of 38.4%. The seed fund still gets exactly 20%. The existing shareholders paid for the pool.
That is why you negotiate the size of the pool, not only the valuation. Base the pool on a written hiring plan: the roles you will fill before the next round and the equity each might need.
Reading the result
- A smaller percentage can be worth more. Before the angel round, Founder A’s 480,000 shares were priced at PKR 50 each, or PKR 24 million on paper. After Version 2, the same shares are priced at PKR 200 each, or PKR 96 million on paper. Paper value is not cash. It only becomes real if someone buys the shares.
- Control shifts too. After Version 2 the founders together hold about 53% on a fully diluted basis. One more round on similar terms could take them below half. Voting rights also depend on your articles of association and any investor consent rights.
Keeping your cap table accurate
A cap table is the record of who owns what. Keep it in a spreadsheet from day one, with a row for each shareholder and columns for share class, number of shares, date issued and price paid. Add options granted from the pool and any convertible instruments that may turn into shares.
In Pakistan, your cap table must match SECP’s records. According to SECP’s FAQ on the Companies Regulations, 2024:
- File Form-3 within 45 days of allotting shares.
- Report shareholding changes above 25% to the registrar within 15 days on Form-3, with an affidavit.
- Collect beneficial ownership declarations from members holding 25% or more, and keep the company’s register up to date.
SECP also says that newly incorporated companies have had to issue shares in dematerialised form since 3 March 2025. Before issuing new shares, check that your authorised capital is large enough. SECP’s FAQ says there is no minimum authorised capital at incorporation. If you need more later, raising it is a separate step with its own filing.
Common mistakes
- Comparing offers by headline valuation alone, while ignoring the option pool and other terms.
- Forgetting convertible notes or SAFEs that will turn into shares at the next round.
- Promising equity to early employees or advisers on a handshake and never documenting it.
- Letting the spreadsheet drift away from SECP’s records.
Checklist
- Build a cap table spreadsheet today, even if you have only two founders.
- Recalculate every offer yourself: post-money valuation, price per share and your percentage.
- Ask whether the valuation is pre-money or post-money, and whether it is fully diluted.
- Size the option pool from a written hiring plan.
- Model the next round as well, so you know where you are likely to land.
- Complete SECP filings within the deadlines after each allotment.
Sources and further reading
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