You founded your own firm three years ago. You initially contributed $200,000 of your own money and in return you received 2 million shares of stock. Since then, you have sold an additional 1 million shares of stock to angel investors. Now, you are considering a second round raising capital from a venture capital firm. This venture capital firm would invest $5 million and would receive 2 million newly issued shares in return.
a. What is the price per share of this funding round?
b. What is the value of the whole firm after this investment (the post-money valuation)?
c. Assuming that this is the venture capitalist's first investment in your firm, what percentage of the firm
will the venture capitalist own? What percentage of the firm will you own after this investment?
d. How much money will you gain from founding this firm after this round of financing? Ignore time value
of money when you answer this question.
You founded your own firm three years ago. You initially contributed $200,000 of your own money and in return you received 2 million shares of stock. Since then, you have sold an additional 1 million shares of stock to angel investors. Now, you are considering a second round raising capital from a venture capital firm. This venture capital firm would invest $5 million and would receive 2 million newly issued shares in return.
a. What is the price per share of this funding round?
b. What is the value of the whole firm after this investment (the post-money valuation)?
c. Assuming that this is the venture capitalist's first investment in your firm, what percentage of the firm
will the venture capitalist own? What percentage of the firm will you own after this investment?
d. How much money will you gain from founding this firm after this round of financing? Ignore time value
of money when you answer this question.
