High Peak Financial


This blog is written by Austin Conner and covers a mix of business topics that interest me.

I am a contract CFO/financial consultant and I work with with a number of business models and industries: recurring revenue (SaaS - B2B and B2C, ecommerce subscription, membership, consumer products), paid apps (edtech, fitness), internet advertising and traditional ecommerce/retail.

Brightwheel Case Study - Cap Table Math

Cap tables can cause a lot of confusion, but sometimes careful analysis in Excel is all that is needed to achieve clarity.  In the video clip from Shark Tank, Dave Vasen, founder of Brightwheel, asks the sharks for $400K for a 4% stake.  

Let's make a bunch of assumptions and try to figure out what that means.  If you do a bit more research, you will find that in mid 2015, the company raised $2.2 million.  Speaking to Forbes in 2016, Vasen mentions the company already had a valuation of $8.2 million.  Let's assume that number was the post-money value after the seed round in 2015.  Lastly, to attract and retain new hires, we will include an option pool of 20% in this round. 

To create the cap table, I will assume the founders were issued 1,000,000 at incorporation.  To calculate the number of shares issued for the $2.2 million raise, I first took the $6 million pre-money value divided by the 1,377,377 (which includes the option pool addition) to find the $4.36 per share. The shares issued of 505,038 is calculated by dividing $2.2 million by $4.36.

Here is another summary of where we are so far:

Now, we want to understand the $400K raise for 4%.  We'll assume that is on a pre-money valuation of $10 million (400 / 0.04) and then find the new per share value for this financing round.  It is $5.31 ($10 million / 1,882,415).  Now it is fairly straightforward since we simply take $400K and divide it by $5.31 to get 75,297 new shares issued.  Here is the new cap table:

And summing it all up:

So the sharks have a 3.8% ownership if they take the deal and Brightwheel has a new post-money valuation of $10.4 million.  The founders still retain over 50% of the common equity.  

Disclaimer: I have no affiliation with Brightwheel. The example here is just that, an example, and is for illustrative purposes only.

Cap TableAustin Conner