VC Term Sheet Mechanics

- **Pre-money valuation** — Company value before the investment - **Post-money valuation** — Pre-money + investment amount - **Example:** $20M pre-money + $5M investment = $25M post-money. Investor owns 20%. - **Option pool shuffle** — VCs typically require a 10-20% unallocated option pool included in the pre-money. This dilutes founders, not investors. A "$20M pre-money" with a 15% pool expansion effectively values the company at $17M.