Funding amount alone does not determine the equity plan

Who receives shares, when, at what price, and what percentage? Equity planning considers future ownership through funding, hiring, further rounds, and IPO or M&A. First distinguish where the money goes.New-share financing brings cash into the company; a founder's sale of existing shares brings proceeds to the founder.Business growth funding and shareholder liquidity are separate.

About ten years ago, I reconstructed equity financing histories from securities registration statements for 14 listed companies. Here, we revisit Bengo4.com and recheck the historical public materials. Tracing investors and dilution through rounds from the final ownership structure helps think about your own future.

First understand pre-money valuation and option pools

Pre-money is total equity valuation before financing; post-money is after it. In a simple common-share example, raising JPY100 million at JPY400 million pre-money yields JPY500 million post-money and a 20% investor stake. At JPY400 million post-money, it would be 25%. Valuation is not the company's bank balance.

Stock options, or SOs, permit future share acquisition on specified terms. In another example, 700 founder shares plus a planned 100-share option pool form the 800-share base for a JPY400 million pre-money value. At JPY500,000 per share, JPY100 million financing issues 200 shares. The post-round fully diluted total is 1,000: founder 70%, investor 20%, pool 10%.

Only 900 shares are actually issued, giving the founder approximately 77.8% currently. The 70% is a planning figure assuming the pool becomes shares. A 10% pool is merely this example, not a recommendation or universal legal maximum. If the next round also grants a new investor 20% post-money without changing the pool, founder ownership becomes 70% × 80% = 56%.

Trace Bengo4.com's financing through share counts

The company listed in December 2014. The following actual figures are organized from the contemporaneous prospectus and amendments corresponding to the securities registration statement, specifically the changes in shares and capital and third-party allotment sections. Proceeds are before issuance expenses, and share counts and prices use units at each issue date.

Figures follow the original materials. The February 2013 price multiplied by shares differs from the reported total by JPY0.40 due to a fractional difference.

The table alone may suggest a collapse from approximately JPY2.33 million to JPY233 per share, but share units changed. A February 2013 gratis allotment added 19 shares per share, multiplying holdings by 20; a September allotment added 499, multiplying by 500. One original share became 10,000 shares.These gratis allotments increased shares without bringing new cash into the company.

Adjusting the 2012 JPY2,333,334 to the same units gives approximately JPY233.33. February 2013's JPY116,666.70 divided by the later 500 factor also gives approximately JPY233.33. However, the first issue was Class A preferred and later issues common. Aligned units and similar prices do not establish identical rights, timing, or value.

Finally reconcile with major-shareholder balances

DG Incubation's 43 preferred shares from 2012 became 430,000 after both allotments. Its additional 200 common shares in June 2013 became 100,000 after the later 500-fold allotment. Preferred shares converted one-for-one to common in August 2014, totaling 530,000, matching the prospectus shareholder section.

Immediately after the financing, DG held 43 of 643 shares, approximately 6.69%. Mechanically applying that preferred-share price to all shares gives roughly JPY1.4 billion pre-money and JPY1.5 billion post-money. However, this assumes the same price for 600 common shares.That multiplication alone does not establish the fair value of all shares.

In reconstruction tables, separate shares from financing, gratis allotments, and purchases from other holders. If totals do not reconcile to the final major-shareholder table, forfeitures, transfers, or measurement dates may be missing. Do not invent explanations to fill discrepancies.

IPO proceeds received by the company versus shareholders

The IPO offer price was JPY1,230 per share, but underwriters paid the company JPY1,131.6; the JPY98.4 difference was underwriting proceeds. Separating the ordinary primary offering from existing-share sales gives the following. Company and seller receipts use underwriting prices before issuance and related expenses.

Issuance expenses and seller taxes must be deducted further. Estimated net company proceeds from the ordinary offering were disclosed as JPY414,692,000 after approximately JPY4 million issuance costs. The approximately JPY455 million investor-facing value is not all usable company cash.

There was also an over-allotment sale of shares borrowed by the underwriter, followed by a related 168,000-share third-party allotment on January 9, 2015, paying JPY190,108,800 to the company. This is confirmed in the post-listing securities report for the year ended March 2015. Combined with the ordinary offering, company receipts totaled JPY608,800,800, and issued shares increased from 6,693,400 to 7,231,400. Do not add existing-share sale proceeds.

My earlier table combined the ordinary offering and additional allotment in one column. Here, payment dates are separated and plans reconciled with actual execution. The JPY1,230 offer price was the common-share public sale price; private preferred prices, option exercise prices, and subsequent market prices are separate figures.

Do not simply add the original number of options granted

The prospectus showed 6,693,400 issued shares and options over 293,400 shares at October 2014 month-end. Their sum, 6,986,800, was the shareholder-table denominator. DG's 530,000 shares represented approximately 7.92% of issued shares or 7.59% including options. The same holding gives different percentages.

The option balance reconciles from 390,500 originally granted shares less 97,100 forfeited through waiver, departure, or similar events. The JPY233 exercise price was not cash received at grant. The lesson is not an ideal option percentage butseparate management of issued shares, outstanding rights, and planned future poolsIt is.

Private companies can also be analyzed; ask AI for tables with sources

Even for private companies, financing announcements, investor announcements, and registry certificates can reveal some rounds and share-count changes. Check whether announced fundraising includes debt. Public information may not establish every shareholder's stake.

The Ministry of Justice's explanation of registered matters includes capital, issued shares, and share classes, but a registry certificate is not a complete shareholder list or financing-price history. Capital increases also differ from total paid-in cash. In this IPO example, approximately JPY419 million paid in increased stated capital by approximately JPY209 million.

Today, AI capable of reading public documents can draft tables and formulas rather than requiring manual entry into every Excel cell. Ask it to retain the following.

• Announcement and execution dates, counterparties, share classes, contemporaneous counts, prices, and payments
• Split and gratis-allotment ratios, comparable adjusted counts, and option grants, exercises, and forfeitures
• Company receipts versus existing-share proceeds, with formulas
• Source title, URL, and page for each figure, verified facts, assumptions, and unknowns

For example: “Organize each transaction's share count, price, and company receipts from these public materials in Excel. Cite source pages, adjust for share splits and similar events, and leave unknown values unfilled rather than guessing.”

Then reconcile against major-shareholder balances and issued totals. Gratis allotments, additional issues, and options must match original sources at every date. Tools can prepare tables, but deciding who receives shares and why remains management's responsibility.

The aim is not to copy others' percentages. Model what must be achieved before the next round, options needed for key hires, and desired ownership at IPO or M&A. Include below-plan valuations and examine rights, contracts, and company cash as well as dilution before agreeing terms.

A reference for equity financing fundamentals is Tetsuya Isozaki's Startup Finance, Expanded and Revised Edition(Nippon Jitsugyo Publishing, 2015). This article's actual figures and calculations are reconstructed from Bengo4.com's public materials, not quoted from that book's examples.