The whole story in one sitting

Two founders start a company and own all of it. In year 7, a buyer pays $300M for the company. How much of the $300M do the founders get, and why not all of it?

This lesson answers that question with one company and six events. Each event adds one or two new words, and each word links to the lesson that teaches it in depth. This lesson does not teach each step in full. It gives you a map of the course, so that each subsequent lesson has a place on the map.

The company in this course

Northwind Labs is an invented software startup with two founders, Ada and Ben. You will see Northwind in examples across the course. Its numbers are round, but they are near the 2026 market medians. The last section of this lesson compares them.

Predict first

Ada and Ben start with 100% of Northwind. After a pre-seed SAFE, an option pool, a seed round, and a Series A, what part of the company do they own?

Type a guess before you continue. A guess first, even a wrong one, makes the answer easier to remember.

Your guessSave my guess

Step through the story

Use Next to move one event at a time. At each step, look at two numbers: the founders’ percentage and the value of their shares. At the sale, move the sale price. Then compare the founders’ part of the money with their part of the company.

Story

Northwind Labs, from founding to sale

Step through six events. Watch the founders' part of the company, and the value of their shares.

1. 1. Year 0Founding
2. 2. Year 0Pre-seed SAFE
3. 3. Year 1Option pool
4. 4. Year 1Seed round
5. 5. Year 3Series A
6. 6. Year 7Sale

Step 1 of 6: Founding

Ada and Ben start Northwind Labs. The company issues 12,000,000 shares of common stock, half to each founder.

Ada and Ben own

100%

All of the company

Their shares

12,000,000

Half each

Price per share

—

Before a priced round

Value of shares

—

Needs a price

Who owns Northwind

Ada and Ben own 100% of the company. Their shares vest over four years, so a founder who stops work early does not keep all of them.

BackNext: Pre-seed SAFE

Step 1: Two founders, 12,000,000 shares

A company divides its ownership into shares. Northwind issues 12,000,000 shares of common stock, and Ada and Ben each buy 6,000,000 of them for a very small price. Each founder owns 6,000,000 ÷ 12,000,000 = 50%.

The number 12,000,000 has no special meaning. A company can issue 10,000 shares or 10,000,000 shares. Your percentage is always your shares divided by all the shares.

The founders’ shares vest over four years, with a one-year cliff. No shares vest in the first 12 months. Then 25% vest at one time, and the rest vest each month. If Ben stops work at Northwind after six months, the company can buy all of his unvested shares at the small price that he paid. This rule protects the founder who stays and does the work. The lessons on shares and ownership and on vesting and cliffs teach these ideas.

Step 2: A pre-seed SAFE

Ada and Ben want money to build the first product. A group of angel investors gives Northwind $1M on SAFEs. A SAFE is a contract: the investor pays today and gets shares at the next priced round. The valuation cap sets the highest price at which the SAFE converts into shares.

With a post-money SAFE, the part of the company that the SAFE buys is easy to calculate:

SAFE part = Amount ÷ Post-money cap
          = $1M ÷ $10M
          = 10%

Northwind does not issue new shares at this time. But the SAFE fixes the 10% on the day that Ada and Ben sign. If they sign more SAFEs, the parts add together: five SAFEs of $100K at a $5M cap sell 10%, not 2%. The lessons on what a SAFE is and on post-money cap math teach the details.

Step 3: An option pool

Northwind wants to hire engineers. Startups give engineers stock options as part of their pay: the right to buy shares at a fixed price in the future. The board puts shares into a reserve for these options. This reserve is the option pool, and Northwind’s pool has 2,400,000 shares.

Venture deals count ownership on a fully diluted basis. That count includes the full pool, as if the company issued all of it. After this step, the fully diluted count is 16,000,000. It has 12,000,000 founder shares, 2,400,000 pool shares, and 1,600,000 shares for the SAFE as if it converted today.

The pool is 2,400,000 ÷ 16,000,000 = 15%. But the SAFE continues to own 10%. A post-money SAFE counts all shares and any pool that exists before the priced round. Thus the 15% comes only from the founders’ part: 90% − 15% = 75%.

This result depends on the timing. Northwind makes its pool before the seed round, not as part of it. If the seed investors ask for a new pool as part of their round, that pool also dilutes the SAFE. The lesson on how a SAFE converts teaches this rule. The lesson on stock options explains what the employees get.

Step 4: The seed round

One year after the start, a seed fund offers $4M at a $16M pre-money valuation. This round is a priced round: Northwind sells new preferred stock at one price for each share. The post-money valuation is $16M + $4M = $20M, and the seed fund gets $4M ÷ $20M = 20% of the company. In the same round, the SAFE converts into preferred stock at its cap price.

Worked example · step 1 of 5

The seed round, share by share

1. 1

   Count the shares before the new money

   The seed price uses the fully diluted count before the round: the founders, the pool, and the SAFE. The founders and the pool are 90% of that count, because the SAFE is 10%.

   Founders + pool
     = 12,000,000 + 2,400,000
     = 14,400,000
   All shares
     = 14,400,000 ÷ 0.90
     = 16,000,000

Show step 2Show all steps

Do the last step of the example yourself. Then try a different seed offer, and find the price and the new shares.

Work it out

After the seed round, Northwind has 20,000,000 shares. Ada holds 6,000,000 of them. What part of the company does Ada own?

Your answerCheck

Work it out

A different seed fund offers $5M at a $20M pre-money valuation, on the same 16,000,000 shares. How many new shares does the fund get?

Your answerCheck

The lessons on pre-money and post-money, price per share, and how a SAFE converts teach this math in full.

Step 5: The Series A

Two years after the seed round, hundreds of customers pay for Northwind’s software. A venture firm is the lead investor of a $15M Series A at a $60M pre-money valuation:

Post-money    = $60M + $15M = $75M
Series A part = $15M ÷ $75M = 20%
Price         = $60M ÷ 20,000,000
              = $3.00
Founders      = 60% × (1 − 20%)
              = 48%

Ada and Ben own less of the company than after the seed round. This decrease is dilution. But after the round, each of their 12,000,000 shares has a value of $3.00. Thus their shares are worth $36M on paper. After the seed round, the same shares were worth $12M.

Many Series A investors also ask for a larger option pool, inside the pre-money valuation. Then the founders pay for the new pool. This story does not include that step, so that each step shows one idea. The lesson on the option pool shuffle shows its cost. The lesson on dilution across rounds runs many rounds, one after the other.

Step 6: The sale

In year 7, a larger company buys Northwind for $300M in cash. This sale is Northwind’s exit. The investors hold preferred stock, and preferred stock has a liquidation preference. With the standard 1x non-participating preference, each investor takes the larger of two amounts: its money back, or its percentage of the price.

At $300M, the percentage of each investor is worth more than its money. The Series A investors get 20% × $300M = $60M, which is more than their $15M. Thus all investors convert to common stock, and each holder gets its percentage. Ada and Ben get 48% × $300M = $144M, or $72M each.

A smaller sale gives a different split. At $40M, 20% is only $8M, so the Series A investors take their $15M back first. The other $25M goes to the other holders. Ada and Ben get $15M, only 37.5% of the price, although they own 48%. At $20M or less, the three preferences ($1M + $4M + $15M) take all the money, and the founders get nothing.

In the widget, move the sale price to $40M and then to $20M. Compare the bar for the sale money with the ownership after the Series A.

How typical is this story?

Northwind’s rounds are near the medians, but its path is clean. Many real founders sign more SAFEs, raise a bridge round, or add a larger pool. The table compares Northwind with the market. A median is the middle deal, not a target.

The founders’ part is also lower in real data. In the Carta Founder Ownership Report 2026, the median founding team owned approximately 56% after the seed round and 36% after the Series A. Northwind’s founders own 60% and 48%.

Quiz · question 1 of 6

Test what you learned

Northwind signs a $1M post-money SAFE with a $10M valuation cap. Before a priced round, what part of the company did Northwind sell?

• ANothing until the SAFE converts
• B9.09%
• C10%