When a UAE startup raises money, the valuation tells only part of the ownership story. The result also depends on which shares count before the round, which instruments convert, whether the option pool changes and which money buys new shares. Before signing terms, put every source of change into one dated model. Ask the people negotiating the transaction to agree on the assumptions and reconcile the final calculation against the documents.
Imagine a Dubai software startup with two founders, an early investor and a hiring plan. A new investor proposes to buy 20% in a priced round. The team also wants a pool for future hires. The new investor's percentage can stay at 20% while the founders give up different amounts depending on how the pool is treated. The difference becomes visible when the team models share counts and states the basis for every percentage.
Establish the starting ownership before negotiating the ending
Begin with the issued shares by holder and class. Reconcile them to the company's current records and the documents that explain recent changes. Include the date. Record grants, options, warrants or instruments that may convert separately. A working spreadsheet can be useful for negotiation, but ask the company secretary or legal adviser to confirm that it reflects the actual instruments and approvals. A founder's recollection of a promise and an issued share are different entries.
Prepare a second view for the agreed fully diluted calculation. This usually asks what the ownership would look like after including specified rights and reserved shares. The exact definition depends on the document and the purpose of the model. Some figures are calculated before the round and others after. Write the definition beside the number. If a pool appears in the calculation, show how much is allocated to awards, how much remains available and whether the round proposes increasing it.
Keep economic interests, votes and approval rights in separate fields. Different classes may carry different rights. An ownership percentage from a fully diluted view can help compare a proposal, but it cannot tell the founders who can approve a sale, appoint a director or receive proceeds first. Keep those questions connected to the relevant agreement and share terms. Review them at the same time as the percentages so neither side assumes that the ownership calculation settles them.
Walk the proposed round from share count to percentage
Suppose the hypothetical startup has 700,000 issued shares before the round. The founders collectively hold 560,000, and an early investor holds 140,000. Their issued percentages are 80% and 20%. Assume the company is valued at AED 7 million pre-money and a new investor pays AED 1.75 million for newly issued shares. With no pool or conversion in the calculation, the price is AED 10 per share, the company issues 175,000 shares and the total becomes 875,000. The founders then hold 64%, the early investor holds 16% and the new investor holds 20%.
The founders still have 560,000 shares. The percentage falls because the total rises. The founders' decline is 16 percentage points, from 80% to 64%. The relative decline is 20% of their prior percentage. Keep the units clear when describing a result. A term sheet can refer to percentages of different totals, and a conversation about how much the founders are giving up can quickly mix up percentage points and relative dilution.
Compare the price calculation with the cash movement. The company in this example receives all AED 1.75 million, before any transaction costs. If part of a deal instead goes to an existing shareholder to buy their shares, show that transfer separately. A transfer can change who owns the shares without increasing the total. A primary issue increases the count and sends the purchase money to the company. In a mixed transaction, model the two steps and check that the company cash forecast includes only the proceeds the company actually receives.
| Entry | No pool scenario | Pool included before pricing |
|---|---|---|
| Founders | 560,000 shares, 64% | 560,000 shares, 56% |
| Early investor | 140,000 shares, 16% | 140,000 shares, 14% |
| New investor | 175,000 shares, 20% | 200,000 shares, 20% |
| Unallocated pool in model | None | 100,000 reserved shares, 10% |
| Total in calculation | 875,000 issued shares | 1,000,000 on the assumed fully diluted basis |
Find who bears the pool increase
In the second illustration, assume the parties use the same AED 7 million pre-money valuation and AED 1.75 million investment but count a 100,000-share reserve before pricing the round. The denominator for the pre-money price rises to 800,000. The implied price is AED 8.75, so the investor gets 200,000 new shares. On that assumed fully diluted basis, the total is 1 million and the founders hold 56%. The new investor still gets 20%, and the reserve represents 10%. The 100,000 reserved shares in the model are separate from the 900,000 issued shares after the round, assuming no pool awards have been exercised.
Ask how much capacity the company genuinely needs for the hiring plan and when it expects to use it. If the proposal specifies a percentage after closing, clarify whether it refers to the entire pool or the remaining unallocated part. Confirm whether the increase is included in the price calculation and who bears it. An available reserve may help the company hire. Its size and timing still belong in the negotiated model. Compare the result when the reserve is smaller or is created after the round under different terms.
Also check how the model changes in a later round. If the founders are at 56% and a future primary investor buys 15% post-money, with no other changes and both percentages on the same basis, the prior holders' percentages are multiplied by 85%. The founders would move to 47.6%. It is a sensitivity test, not a prediction. A later pool increase, conversion or participation by existing shareholders could change it. Use the exercise to see how much the result depends on an assumption before agreeing to it today.
Read the conversion documents rather than guessing a percentage
List each outstanding instrument in its own row. Identify the funding amount, conversion events and the relevant price or valuation definitions. If there is a discount, valuation cap or other provision that changes the price, model it under several permitted scenarios using the actual text. Do not assume a cap is the company's current valuation. Check which shares the instrument includes in its own calculation and how it interacts with other instruments and any pool increase. Ask counsel to verify the sequence, especially where multiple instruments convert in the same transaction.
Hub71's official FAQ describes a cash incentive for selected startups through a SAFE alongside in-kind services. That is a local example of why founders should distinguish the cash amount, the service package and the ownership terms. The public summary does not supply the conversion inputs for a specific company. Read the proposed instrument, confirm the definitions and model the shares when a relevant event occurs. Keep the value of in-kind support separate from the share calculation unless the agreed documents provide otherwise. Hub71 programme FAQs
A Dubai Chamber of Digital Economy reel shows a startup and investor event. A founder can use an early conversation to find out whether an investor expects a priced issue or another instrument and what information it will need. Record that expectation as a discussion point until the terms are documented. Share a dated model when both sides can check it against the same proposal.
Check the approvals and the rights behind the result
Identify the company that would issue or transfer the shares. The legal steps can depend on the entity, its jurisdiction, its articles and the relevant agreements. ADGM's Registration Authority, for example, publishes event-driven filing guidance that covers allotment and directs readers to the company's articles and applicable rules. For the actual transaction, ask advisers to confirm authority to issue, class approvals, any rights of existing holders and the records and filings required after closing. The ADGM example is specific to its regime. ADGM event-driven filing guidance
Discuss what happens when existing investors choose to participate. A holder may have an agreement allowing them to subscribe in a future round. Check the terms and identify whether their investment sits inside the headline round amount or adds to it. A model that assumes a fixed amount and silently adds another subscription can give the wrong share count. Keep allocation, price and total funding visible in every scenario.
In the no-pool illustration, assume the original AED 1.75 million round stays fixed and the early investor takes AED 350,000 of that allocation at AED 10 a share. The early investor buys 35,000 new shares and the incoming investor buys the other 140,000. The early investor ends with 175,000 of 875,000 shares, or 20%. The incoming investor has 16%, and the founders still hold 64%. The result differs from adding AED 350,000 on top of the original round. If both sides expect the incoming investor to receive 20% while the early investor keeps 20%, the deal needs a different allocation or other changed terms. Put that question in the model before asking either party to approve the outcome.
Check how the proposed rights would apply to decisions or outcomes the founders care about. Ask who can approve a new issue and whether certain holders have rights that matter in a future financing or sale. If share classes affect how proceeds would be distributed, model a separate illustrative distribution using reviewed terms. A cap table is useful for ownership. The documents and the separate scenario are needed to assess the outcome when rights differ.
Agree on the model that will survive closing
Keep a dated version for each proposal. Include the starting counts, share price, issue and transfer lines, conversions, pool treatment and cash to the company. Calculate issued and fully diluted ownership in separate views. Make the totals reconcile, and give someone other than the person who built the model a chance to reproduce them. Resolve differences in definitions before negotiation moves to final documents.
Give the model a short list of inputs the founders can negotiate. One might be the cash required for the next release. Another might be the reserve needed to make specific hires. Change each input separately and show how the result changes for every holder. This helps the team distinguish a meaningful difference in the terms from a rounding difference on the final percentage.
Ask what changed at closing. The money received, securities issued and conditions satisfied should match the final model, with any difference explained and recorded. Update the company records through the relevant process, and keep a copy of the final schedule for the next financing. The useful result is a founder who can say how much usable money the company received, what each holder owns on the stated basis and which rights need separate attention. The headline valuation can then sit beside the answers it does not contain.
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