2. Starware Software was founded last year to develop software for gaming applications. The founder initially invested
Question:
2. Starware Software was founded last year to develop software for gaming applications. The founder initially invested $800,000 and received 8 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 million and wants to own 20% of the company after the investment is completed.
a. How many shares must the venture capitalist receive to end up with 20% 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)?
Step by Step Answer:
Fundamentals Of Corporate Finance
ISBN: 9781292018409
3rd Global Edition
Authors: Berk, Peter DeMarzo, Jarrad Harford