Startup Funding Simulation

Place students on both sides of the funding table

An early-stage company is raising its first round. Students negotiate the full term sheet - valuation, ownership, dilution, option pool, board seats, consent rights and investor protections - and discover that the headline valuation is the least of it.

3 - 5-hour team-based simulation
Due diligence - Strategy - Live negotiation
In-class, online or hybrid delivery

The term-sheet decisions students make

An early-stage EdTech company is raising its seed round. Founders want enough capital to grow without giving away the company or the right to run it. Investors want a meaningful stake, oversight and protection against what might go wrong. Every provision in the term sheet moves that balance, and students negotiate all of them.

Funding and valuation

Agree the funding amount, pre-money and post-money valuation, investor ownership and founder dilution - and work out how the option pool quietly shifts all four.

Governance and control

Settle board representation, voting and consent rights, and how much of the founders' decision-making survives the round.

Investor protections

Negotiate anti-dilution, pre-emption, transfer and exit provisions - the terms founders sign without reading and later wish they hadn't.

At a glance

Duration

3 to 5 hours

Configure the simulation for one intensive workshop or divide it across several teaching sessions.

Format

Deal negotiation

Each startup team is paired with one VC team, so every group negotiates its own deal.

Level

UG, PG and MBA

Adapt the expected depth of analysis and reflection to the level of the course.

Professor tools

Lecturer admin dashboard

Manage participants, adjust the timeline, control progression and review team inputs.

Prerequisites

Beginner-friendly

No prior startup finance required. Every term is defined in the materials.

Delivery

Classroom, online or hybrid

Run it in one session, across several classes or within a professor-defined homework period.

Optional assessment

Funding agreements

Use the final agreements and comparative outputs to support optional assessment and debriefing.

Course fit

Entrepreneurship and financing modules

Entrepreneurship, new venture creation, entrepreneurial finance and venture capital modules.

How the term sheet shapes the deal

Students examine how capital, ownership, control and risk interact within a seed-round agreement. By comparing Startup and VC priorities across valuation, dilution, governance and protection terms, they learn to assess the complete deal rather than treating one headline figure as the measure of success.

Startup Funding simulation gameflow and stages

1. Intro | 7 minutes:

A briefing video introduces the company, the funding round and the two roles. Students learn which side of the table they are on, what that role is trying to protect, and what they will have to decide.

By the end of the Intro, students understand the funding challenge, their own objectives and priorities, the stages ahead, the materials available to them, and what they need to prepare before the negotiation begins.

2. Analysis | 90 minutes:

Startup and VC teams work independently and never see each other's thinking. This is the due-diligence stage: teams review the brief, the company information, the pitch materials and the funding ask, then decide what a strong deal looks like from where they sit.

Each team drafts its own opening term sheet - funding amount, pre-money and post-money valuation, ownership, founder dilution, option pool, board representation, consent rights and investor protections. For most students this is the moment a funding round stops being a headline number and becomes a set of interlocking provisions.

The two sides pull in opposite directions. Founders weigh raising enough capital against how much of the company they surrender, and a stronger valuation against terms that will constrain them later. Investors weigh a defensible stake, oversight and downside protection against a price the founders will actually accept. Neither can simply maximise every term.

By the end of Analysis, each team has:

completed its opening term sheet;
identified which terms matter most and why;
built the arguments behind each proposed provision;
formed a view on what the other side is likely to want.

3. Strategy | 30 minutes:

Each team now sees the other side's opening term sheet for the first time. The gaps are immediately visible, and they are rarely where students expected.

Teams work through the differences and sort them: which are economic, which concern ownership and control, and which are legal protections. That classification is what turns a list of disagreements into a negotiating plan, because the three categories trade differently against each other.

Each team then decides:

which terms are essential and which are tradable;
what it will ask for in return for each concession;
which provisions could stop the deal completing;
how it will open the discussion.

4. Structuring | 120 minutes:

The paired teams meet and negotiate the agreement provision by provision: funding amount, valuation, investor ownership, founder dilution, option-pool size, board representation, voting and consent rights, investor protections, founder restrictions, and transfer and exit provisions.

The VC team enters the negotiated terms into the platform. The startup team moves each provision from "TBD" to "Okay" once it accepts, so nothing is agreed until the founders sign off on it. It is a live, time-pressured negotiation, and it gets loud - students represent their side hard, because the terms they concede are on the record and comparable with every other team's at the end.

Winning every point is not the objective, and teams that try usually run out of clock. The strong groups trade across provisions - accepting a lower valuation for a cleaner board, or a larger option pool for weaker anti-dilution - and understand what each trade actually costs. Some pairs do not agree at all, and a failed negotiation is a legitimate outcome that the debrief handles well.

By the end of Structuring, each group has either finalised a complete funding agreement or identified precisely which provisions prevented one.

5. Reflection | No time limit:

Students see how every other group's deal turned out. Startup teams compare their terms and valuation against every other startup team in the cohort; VC teams do the same against other VC teams; and whole deals can be compared group by group.

This is where the competitive element lands. A team that felt it had negotiated well often discovers three other founding teams gave away less, or held a board seat it surrendered without a fight.

The comparison covers final valuation, ownership, dilution, option-pool treatment, governance rights, investor protections and whether the deal completed at all.

The debrief then works well student-led: selected teams walk the class through their objectives, the terms they prioritised, the concessions they made, the hardest points of disagreement, and what they would do differently in a second round.

Why professors use it

Every term-sheet topic in one deal

Valuation, dilution, the option pool, board control and investor protections stop being separate lecture topics and become provisions students have to trade against each other in real time.

Highly engaging experience

Two hours of live negotiation, with every team's final terms visible to the whole cohort afterwards, reliably pulls in students who stay quiet through a normal seminar.

Create evidence for a focused debrief

Compare Startup teams with Startup teams and VC teams with VC teams to discuss priorities, concessions and why groups reached different outcomes.

What the experience looks like

The Professor Admin Panel supports preparation and delivery, while the Student Interface guides teams from role-specific analysis to a completed funding agreement.

Control the pace

See the complete stage sequence, adjust the time allocated to each activity and control progression. Play begins automatic progression, while Pause and Stop help the professor respond to class pace or divide the activity across sessions.

Prepare with built-in resources

Access setup and facilitation guidance, the Teaching Notes and the Gameflow Diagram without leaving the Admin Panel.

Monitor decisions

Live Monitoring provides access to student inputs and decision tables. Professors can identify incomplete work or groups that need clarification without directing them towards a preferred agreement.

Case materials students work with

Students receive the company's pitch material, its commercial proposition and its opening funding ask. Founders hold fuller information than the investors do - the same information asymmetry that shapes a real round - and the Data Room lets teams share files, models and documents as the negotiation demands them.

The case combines qualitative evidence about the company’s problem and proposed solution with quantitative evidence about the funding requirement, valuation and ownership.

The business problem

Finsim is presented as a response to the gap between financial theory and applied business practice. Students assess the commercial problem and value proposition before considering the funding terms.

The seed-round ask

The company proposes raising $500,000 for 10 per cent of the business, based on a $4.5 million pre-money valuation and a $5 million post-money valuation. Students evaluate this opening proposition rather than treating it as the required outcome.

7 mins

Student Intro Video

Before the timed activity begins, students watch a short briefing that introduces the case, explains the Startup and VC perspectives, and outlines how the funding negotiation will unfold.

Assessment and outcomes

Assessment is optional. Professors may run the Startup Funding Simulation as an ungraded applied activity focused on analysis, negotiation and reflection.

The platform does not generate scores. It shows the outcome of each negotiation alongside selected deal and cohort metrics. These data can support academic judgement, but they should not automatically replace the professor’s evaluation of reasoning, participation and any additional work assigned.

What professors can assess

• Funding and valuation judgement
• Deal completion and role performance

How to interpret the results

• Compare teams against their role-specific objectives
• Evaluate the complete agreement, not one headline term

What professors can assess:

Funding and valuation judgement: Review whether teams selected a credible funding amount and understood how valuation affects ownership, dilution and the wider financing structure. Submitted figures show the decision reached, but do not by themselves establish the quality of every underlying calculation.
Deal completion and role performance: Consider whether the paired teams completed the financing agreement and how the final package relates to the objectives of the role represented.
Optional individual assessment report: Students may be asked to submit a short written report outside the platform once they have reviewed and reflected on their scores. This is not automatically captured or graded by the simulation.

How to interpret the results:

Compare role-specific objectives: Startup and VC outcomes require different interpretations. Startup teams generally seek capital, stronger valuation, lower dilution and continued flexibility. VC teams generally seek sufficient ownership, oversight and investor protection.
Evaluate the whole deal: A high valuation does not automatically indicate the strongest Startup outcome, and a large investor stake does not automatically indicate the strongest VC outcome. Economic and governance terms must be considered together.

Set up and run the funding negotiation

Once participants, roles and timings are configured, Play begins automatic progression through the stages. Coaching is optional. Professors can pause, stop, resume or adjust the session where necessary.

Step 1

Create Startup and VC teams

Assign three to five students to each team and pair one Startup team with one VC team in every independent negotiation group.

Step 2

Configure timings and session settings

Review the five-stage timeline and adjust individual stage lengths to match the available teaching period or a multi-session plan.

Step 3

Start and manage the session

Press Play to begin automatic progression. Pause keeps students in the current stage. Stop logs students out, and Play resumes the session when teaching continues.

Step 4

Monitor progress and prepare the debrief

Review inputs and group progress. Coaching should clarify process or consequences without recommending a preferred valuation or agreement.

Professor Resources

Everything needed to prepare, run and debrief the Startup Funding Simulation is organised within the resources below.

Seed-round financing
Due diligence
Term sheet structure and negotiation
Pre-money and post-money valuation
Equity ownership and founder dilution
Capitalisation table
Employee option pool
Board representation and voting rights
Investor consent and protective provisions
Anti-dilution and pre-emption rights
Transfer and exit provisions
Founder control and decision-making rights
Investor incentives, risk and return
Sources of startup funding, including angel investment and venture capital
Equity and debt financing

Creators of the Startup Funding Simulation

These industry professionals were involved in the inception, creation, development, testing and optimisation of the simulation.

Experienced technology executive. Founded and built several companies and managed the commercialisation of technologies across Europe, Asia, and the US.

Steve Kelly

Structured finance, credit derivatives, and NPL expertise. Portfolio Director at a private equity impact fund and active VC investor. Holds CFA and FRM qualifications.

Raushan Kretschmar

Assistant Professor of Finance at Tilburg University, teaching corporate finance courses. Also lectures at TIAS Business School.

Fatemeh Hosseini

Worked in the finance department of Precomp Tools. Studied Engineering and holds an MSc in Corporate Finance from Bayes.

Aatmay Upponi

FAQs

An option pool reserves equity for current or future employees, so it changes how ownership is divided after the round. Its timing and size can materially affect founder dilution because an investor may ask for the pool to be created or expanded before the investment is completed. Students must therefore look beyond the headline pre-money valuation and calculate who bears the economic cost of the pool. For professors, this creates a practical way to show why two term sheets with the same investment amount and valuation can produce different ownership outcomes.

A term sheet allocates both economic value and decision-making power. A higher valuation may appear founder-friendly, but its benefit can be offset by restrictive investor-consent rights, board representation, transfer provisions or stronger downside protections. Equally, a lower valuation may be acceptable if founders retain greater operating flexibility. The simulation allows professors to move the discussion away from a single headline number and towards the combined effect of ownership, control, protection and exit terms.

A defensible term sheet is internally consistent, financially understood and capable of being explained from each party’s objectives. Students should be able to identify the concessions they made, the protections or benefits they received in return and the effect on ownership and control. Agreement alone is not sufficient evidence of a strong outcome. Professors can assess whether the final package reflects the case information, whether the trade-offs are proportionate and whether the team can justify why it accepted the deal rather than continuing to negotiate.