This is completely off-topic but since the $150,000 is going back to the business, wouldn't that mean that the valuation becomes $1.65M? The word "bought" makes it sound like someone is taking the money and selling their share.
>for $150,000 you could have bought 10% of Airbnb.
Does that mean for $150K I can buy as many shares as constitute 10% of the current outstanding number? Or that after I pay $150K, I will own 10%?
Since new shares are issued, in the former case I end up with 9.0909...% (1/11th) of the company. That gives us a post-money valuation of... $1.65M! (and $1.5M pre-money) But in the more probable reading of the phrase, I own 10% of the post-money $1.5M company, giving us $1.35M pre-money.
So, your choice. Someone more in the VC loop might be able to say that the phrasing definitely means one or the other; I've just got the math.
(ergo the pre/post money valuation thing linked above)
The company's equity was worth $1500K before the investment.
After the investment, the company had $1350K of equity left because it sold 10% of itself, and it no longer owned that chunk of equity.
However, it had $150K of cash that its equity investor paid for 10% of the company's equity. So $1350K of remaining equity + $150K cash = $1500K company value. Same as pre-investment valuation.
It looks like the company's total value didn't change, it just traded 10% of its value for cash. Which is the point of selling equity - cash allows a company to pay for people and things. Equity doesn't.
A "company" can't lose equity it never owned any to begin with. The equity was transferred from one party (usually the founders) to another entity in exchange for cash.
After the investment, the company had $1350K of equity left because it sold 10% of itself, and it no longer owned that chunk of equity.
This is completely wrong.