The two major discussions around pricing terms will be the pre-money valuation of the company and the amount of the raise. These terms also determine how much of the company the investors are getting.

The pre-money valuation is what the investors think the company is worth right now, before making their investment. The post-money valuation is what investors think the company will be worth after the investment. The two should always add up so pre-money valuation, plus the amount of the financing, should equal post-money valuation.

The amount of the raise is straightforward: how much money are the investors giving you. It should be listed in the term sheet.

The amount of equity investors are taking is determined by the amount of the raise and the price per share. Price per share will be based on the pre-money valuation, divided by the number of shares outstanding. Price-per-share is based on the "fully-diluted pre-money valuation." This means that it is based on the assumption that all of the company's unvested shares have been vested, all outstanding options have been exercised, and any convertible securities (usually convertible notes) have been converted. If you have an option pool (or are forced to create one pre-investment), the fully-diluted basis may also include the size of the option pool. To calculate the price-per-share, divide the pre-money valuation by the total number of shares outstanding before the raise (including shares subject to convertible securities and options).

The amount of the company that investors will take for their investment depends on the price-per-share. Divide the total amount of the raise by the price-per-share to determine the total number of shares purchased. Then, divide the investors shares by the total number of shares after the raise-both founders' and investors' shares, plus an option pool (more on that later)-to figure out how much of the company's equity the investors will own.