What it means
A priced round is a financing where investors buy newly issued shares at an agreed price per share. That price puts a value on the whole company, which SAFEs and convertible notes leave open until this point. Rounds are usually named in sequence, starting with Series A.
Investors usually buy preferred stock. Preferred carries rights common stock doesn't, most often a liquidation preference, the right to get their money back before common holders in a sale or wind-down.
The company and the lead investor agree a term sheet, then sign the financing documents, including a stock purchase agreement and an amended charter that creates the new preferred. The board and stockholders approve, the money is wired and the shares are issued. Outstanding SAFEs and notes convert into preferred at their own terms at the same closing.
In the books, cash goes up and so does a preferred stock account in equity, at the amount raised less issuance costs like legal fees. Converted SAFEs and notes leave the liabilities side and join equity. The cap table, the books and the board minutes should all change on the same day.
Acme closes a $5,000,000 Series A at $2.00 per share, so investors receive 2,500,000 shares of Series A preferred. Acme debits cash and credits Series A preferred stock for $5,000,000. If legal fees for the round come to $100,000, they reduce the preferred stock's carrying amount and aren't expensed. Acme's earlier SAFEs convert at the same closing.
Expect new reporting asks: monthly financials, an annual budget and often an audit. The option pool is usually resized as part of the deal.
Why it matters. It sets a price for the whole company, converts outstanding SAFEs and notes, and usually brings new reporting asks: monthly financials, an annual budget and often an audit.
Try it with your numbers
Change any number. The working below updates as you type.
Price = Pre-money ÷ Pre-money shares · Post-money = Pre-money + InvestmentPrice per share
$2.0000
How it’s worked out
- 1Post-money valuation$20,000,000.00 + $5,000,000.00$25,000,000.00
- 2Price per share$20,000,000.00 ÷ 10,000,000 shares$2.0000
- 3New shares$5,000,000.00 ÷ $2.0000, rounded down2,500,000
- 4Shares after10,000,000 + 2,500,00012,500,000
- 5New investors own2,500,000 ÷ 12,500,00020.00%
- 6Founders, before → after8,000,000 ÷ 10,000,000 → 8,000,000 ÷ 12,500,00080.00% → 64.00%
| Holder | Shares before | % before | Shares after | % after |
|---|---|---|---|---|
| Founders | 8,000,000 | 80.00% | 8,000,000 | 64.00% |
| Other holders, options and pool | 2,000,000 | 20.00% | 2,000,000 | 16.00% |
| New investors | 0 | 0.00% | 2,500,000 | 20.00% |
| Total | 10,000,000 | 100.00% | 12,500,000 | 100.00% |
The price is shown to four decimals; new shares are worked from the exact price and fractions are dropped. Real rounds often round the price itself first, which can move the share count by a few shares.
The entry, worked
Acme closes a $5,000,000 Series A. Investors wire the full amount for newly issued Series A preferred stock.
| Account | Debit | Credit |
|---|---|---|
| Cash | $5,000,000.00 | |
| Series A preferred stock | $5,000,000.00 | |
| Total | $5,000,000.00 | $5,000,000.00 |
Equity rises by the amount raised; legal fees for the round reduce the preferred stock's carrying amount instead of being expensed.
Common questions
What's a liquidation preference?
The right to be paid back before common stockholders in a sale or wind-down. In many early rounds it's 1x and non-participating, meaning investors get their money back or convert to common, whichever is worth more.
Do I need an audit after a priced round?
Not by law for a private company, but investors and lenders often ask for one in the financing documents. Read the information rights you agreed to.
What's the difference between pre-money and post-money?
Post-money is pre-money plus the new cash. Investors own their investment divided by the post-money: $5 million into a $20 million pre-money is $25 million post, or 20%. Check whether the pre-money includes a pool increase, because that changes what founders really get.
Where it comes up
The glossary entries, founder guides and lessons on this site that use the term and link here.
- EquityThe residual interest in the assets that remains after deducting liabilities (FASB CON 8 ¶E61)Glossary
- Audit-ready books before your Series AInvestors, lenders and auditors ask for the same things: accrual statements, reconciled accounts and support for every balance. How to be ready first.Guide · 4 min
- First-year compliance calendar for a Delaware C-corpDelaware franchise tax, 1099s, the federal return, payroll filings, state annual reports and sales tax: the deadlines a young C-corp misses most, by month.Guide · 5 min
- How to account for SAFEs on your balance sheetA SAFE is cash today and shares later. Why it usually sits with liabilities, how the cap and discount set conversion, and what to book at the priced round.Guide · 4 min
- Stock options, 409A valuations and vesting for startupsHow option strike prices are set by a 409A valuation, how vesting and the cliff work, and why ASC 718 makes every grant an expense on your P&L.Guide · 4 min
- W-2 year end for startups: boxes, deadlines, correctionsThe W-2 boxes founders get wrong (box 1 vs 3 vs 5, box 12 codes), the W-3, the SSA deadline, state copies, and how to fix a mistake with a W-2c.Guide · 7 min
- Startup tax deadlines by month for a C-corpFederal tax deadlines for a calendar-year C-corp, month by month: W-2s, 1099s, Form 941, Form 1120, estimated taxes and Delaware franchise tax.Guide · 5 min
- How to read an income statement (P&L)Revenue, cost of revenue, gross margin, operating expenses and net income, read line by line, on accrual basis, with the mistakes founders make most.Guide · 7 min
- Balance sheet explained for startupsAssets equal liabilities plus equity. What each startup line means, from deferred revenue to the SAFE and the accumulated deficit, and why it must balance.Guide · 7 min
- Cash flow statement explained: why profit isn’t cashHow the cash flow statement starts at net income, adds back non-cash costs and working capital, splits three activities and ties to the balance sheet.Guide · 5 min
- General ledger and double-entry bookkeeping, explainedHow double entry works: journal entries, debits and credits, normal balances, running balances, the trial balance, and why posted entries are reversed.Guide · 6 min
- Chart of accounts for startups: a starting templateA starting chart of accounts for a US startup: number ranges, the expense accounts you need, and when to add an account versus a class or tracking tag.Guide · 6 min
- SaaS revenue recognition under ASC 606, step by stepASC 606’s five steps applied to a startup SaaS contract: annual prepay, implementation fees, usage and multi-year deals, with the entries.Guide · 6 min
- The accounting equationAssets = liabilities + equity is not a formula you apply at period end. It is true after every single entry, and that is what makes the books provable.Lesson 2
- Accounts, and the five typesEvery account belongs to exactly one of five types, and its type decides which side increases it. Get the type right and the entry writes itself.Lesson 3
- The balance sheetThe other three account types, at one instant — and the single line where the month's profit lands, which is what ties the two statements together.Lesson 11
Read further
General information for US companies, not tax, legal or accounting advice. Check the specifics with a CPA before you act on them.