After a runway of anywhere between 12 and 24 months, and if the company continues to scale successfully, the next event will be the company's first institutional round, also referred to as a series A round. It is not uncommon for this round to include capital being injected from outside investors, such as a VC fund, but also for a wider ESOP to be established as part of the capital raise. This results in two diluting events that are performed simultaneously at the Series A closing. Looking at each of these individually, the first step is that the ESOP is set up in the pre-money valuation. That is before the Series A capital is raised. And then next, the Series A financing is injected for business. In order to end up with the desired waiting and the total number of shares for the ESOP post the series A injection, the number of shares granted to the ESOP will need to be grossed up so that the weight the ESOP has in the company after the subsequent series A raise is the desired amount. In our example, the company and VCs negotiated a 20% ownership stake in return for the venture capital fund investment. And the VCs make it a requirement that an employee stock option pool ESOP of 10% post-investment is established and put into the pre-money valuation. Let's walk through each of the two steps. First, the dilution associated with the ESOP is taken into account before the VC investment is made and out of the pre-money valuation in order to maintain a 10% ESOP at the Series A closing. So the first step is to dilute the existing shareholders by 12.5%. This is calculated by taking the ESOP post money percentage of 10% and dividing it by one minus the series A investment percentage of 20%, or in other words, multiplying by 0.8. At this stage, the founders will then have the 72.8% stake that being the previous 83.3% stake, multiplied by one minus the 12.5% dilution coming from the allocation to the ESOP. The seed investors, which owned a 10% stake before, will now own 8.8%, 10%, multiplied by one minus 12.5%, and the initial employees now own 5.9% as the 6.8 multiplied by 1 minus 12.5%. The ESOP of 12.5% could be added to the 6.8% early employee hire allocation. But for this analysis, we'll show it separately. The second step in the dilution process will be for the 20% dilution coming from the Series A capital raise. All of the shareholder ownership positions calculated in the first first dilution step will be diluted by a further 20% or multiplied by 1 minus 20% or 0.8. The founder stake will decrease from 72.8 to 58.3. The seed investor stake will decline from 8.8 to 7.0. The initial employees goes from 5.9 down to 4.7%, and the newly formed ESOP will be diluted from 12.5% down to the desired 10%. Rounding out the shareholder ownership will be the new Series A investors at 20%.