The next step in setting up our simple cap table is to think about what happens at our first capital raising round the seed round. Our assumption here is that the seed round, which is gonna be created by issuing convertible preference shares to those seed capital investors will amount to 10% of the shares of the company. As a result of these new shares being created and allocated to the seed capital investors, the ownership percentage of the remaining investors in the business will decline. The founders who held 92.5% of the business before will now own the bit of the business, which is not allocated to the seed investors, or in other words, 90% of the share capital of the business. So the 92.5% they had before now represents only 90% or one minus the 10% stake. If I hit F4 to lock onto this, I'll then also be able to copy this down for the early employees as well. So we can see that the founder state has gone down from 92.5% to 83.3% as a result of owning 92.5% of 90% of the business. If these extra 10% of shares are created and allocated to the seed capital investors. The seed investors themselves will then own 10% of the shares in the company, and that gives us the 100% ownership of the business. This now can be copied up to the cap table.

So the founders now own the 83.3% stake in the business.

The early employees, 7.5% allocation now equates to 6.8%, and the seed investors have 10% in terms of the dilution experience by the existing share owners, the founders, and the early employee hires. Now, if we copy this formula to the right, we'll see that there is dilution of 10% of the ownership of the founders and the early employee hires. As you would expect, if 10% of the shares have been given to another investor.