Growth and dilution belong in the same calculation

New funding can help a company expand capacity, improve its product and win customers. It can also change the proportion of the company owned by existing investors. A sound venture model considers both effects together.

A simple example shows the relationship. If a holding represents 1% of a company valued at £100 million, its proportional gross value is £1 million before differences in rights or deductions. If the company later reaches £200 million but the holding has diluted to 0.8%, that proportional value becomes £1.6 million. Company value doubled; the illustrative holding value rose by 60%.

The example is explanatory and is not a Bolt forecast. It shows why repeating a company’s valuation growth as an investor’s return can be misleading. Entry price, share issuance, different classes and transaction terms all sit between the two.

Bolt’s management projections assume 10% dilution per funding round. Actual financing terms may create more or less dilution, and the number and timing of rounds matter.

Different rights can also use different ownership calculations. Option and buyback terms may refer to shares in issue, while a fully diluted valuation considers potential additional shares. The relevant contractual basis matters when translating company value into holding value.

Funding should therefore be assessed in context. Capital raised on suitable terms may enable growth that outweighs dilution, but that outcome requires execution. The useful investor question is how much additional value a financing can help create, compared with the ownership and rights given up to obtain it. That is where a growth story becomes an investment calculation.