Wow that's a lot of dilution for a late stage round. I feel bad for the employees that suddenly have their equity cut by 60%. If I'm doing my math right, ($865 MM pre-money) then it means even with the higher valuation preferred price goes down
Some reports put the post-money valuation after the Series C at $700M. For this round, the pre-money is reported to be $865M and post-money is $1.4B.
If I had a 1% stake in DoorDash after the Series C, it was worth $7M ($700M * 1%). Assuming all the Series D round was new shares issued (we don't know the details), my stake in DoorDash would be diluted from 1% to 0.62% after the Series D (1% * $865M/$1.4B). However, the value of my stake would have grown from $7M to $8.68M (0.62% * $1.4B) because the valuation went up.
This obviously ignores things like value of preferred vs common stock. But, it is not straightforward to say everyone's stakes were diluted by 60% and it's bad. They were diluted, but the value of their holdings theoretically went up.
This is something a lot of the "all dilution is bad" commenters don't seem to understand. Dilution isn't automatically bad. What matters is the total dollar value of your stake in the company. Did it go up or down? What percentage of the pie you hold isn't really relevant.
Correct me if I'm wrong, but couldn't the preferred price stay flat, even with dilution? The company issues new shares and sells them at e.g. the current preferred price. Now there are more outstanding shares, and a higher post-money valuation, but a close to flat pre-money valuation. In this case the preferred price in real percentage of the company terms is higher since there are now more shares outstanding, but the price per share is flat.
I imagine the 409a (common stock price went down), but I don't think you can infer from this that the preferred price went down. The missing figure is how many shares were issued.
Is there like a good blog post out there that can explain the difference between preferred and common stock, dilution, and all the other nuanced things about equity?
Most likely earlier share holders sold their stakes, so not much dilution. Perhaps founders took money off the table too. In these cases, there is not much dilution because new shares are not issued (but not much capitalization either).
That's right, but it is usually minimal. This is a very dilutive round. But they need the cash, as the general MO is to try and drive competition out of business by pushing prices down. So not much of a choice here.
It's hard to infer much from this article since it lacks all relevant detail. If the earlier share holders are selling common stock, it's not clear how that affects the preferred price.
Do you mind sharing the math? Isn't impossible to know how much the equity is cut by because we don't know how much dilution there was (vs. liquidation)?
jartelt|8 years ago
If I had a 1% stake in DoorDash after the Series C, it was worth $7M ($700M * 1%). Assuming all the Series D round was new shares issued (we don't know the details), my stake in DoorDash would be diluted from 1% to 0.62% after the Series D (1% * $865M/$1.4B). However, the value of my stake would have grown from $7M to $8.68M (0.62% * $1.4B) because the valuation went up.
This obviously ignores things like value of preferred vs common stock. But, it is not straightforward to say everyone's stakes were diluted by 60% and it's bad. They were diluted, but the value of their holdings theoretically went up.
spookthesunset|8 years ago
wskinner|8 years ago
I imagine the 409a (common stock price went down), but I don't think you can infer from this that the preferred price went down. The missing figure is how many shares were issued.
cgb223|8 years ago
jtmcmc|8 years ago
amitutk|8 years ago
not_that_noob|8 years ago
wskinner|8 years ago
LethargicStud|8 years ago