You have started a company and are in luck-a venture capitalist has offered to invest. You own 100% with 5.12 million shares. The VC offers $1.02 million for 820,000 new shares. a. What is the implied price per share? b. What is the post-money valuation?

You have started a company and are in luck-a venture capitalist has offered to invest. You own 100% with 5.12 million shares. The VC offers $1.02 million for 820,000 new shares. a. What is the implied price per share? b. What is the post-money valuation?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation

Section: Chapter Questions

Problem 9MC

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Question

Starware Software was founded last year to develop software for gaming applications. The founder initially invested $900,000 and received 10 million shares of stock. Starware now needs to raise a second round of capital, and it has identified a venture capitalist who is interested in investing. This venture capitalist will invest $1.20 million and wants to own 39% of the company after the investment is completed. a. How many shares must the venture capitalist receive to end up with 39% of the company? What is the implied price per share of this funding round? b. What will the value of the whole firm be after this investment (the post-money valuation)?

You have started a company and are in luck—a venture capitalist has offered to invest. You own 100% of the company
with 5.12 million shares. The VC offers $1.02 million for 820,000 new shares.
a. What is the implied price per share?
b. What is the post-money valuation?
c. What fraction of the firm will you own after the investment?

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