Table 6.9 provided the outcome of an early stage investment in Bethesda Imaging, Inc.. The equity stake of the co-founders has dropped but their wealth has increased. How can that happen?

Table 6.9

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Shares Stake Stock Value Profile Corporate Valuation Shares Authorized Shares Outstanding Shares Remaining 10,000 2,000 8,000 Stock Price Initial Incorporation Value Shares Round I Stake Round II Value Shares Stake Value $2,000 $1,750,000 $5,312,500 3,500 6,500 $1.00 4,250 5,750 $500.00 $1,250.00 Initial Assignments President Martha 1,000 50.0% $1,000 1,000 28.6% $500,000 1,000 23.5% $1,250,000 CEO Jake 1,000 50.0% $1,000 1,000 28.6% $500,000 1,000 23.5% $1,250,000 Executive C option 0 0.0% $0 0 0.0% $0 0 0.0% $0 Executive D option 0 0.0% $0 0 0.0% $0 0 0.0% $0 Executive E option 0 0.0% $0 0 0.0% $0 0 0.0% $0 Angel Investor - A $0 1,500 35.3% $750,000 1,500 35.3% $1,875,000 Angel Investor Angel Investor - C B $0 0 0.0% $0 0 0.0% $0 $0 0 0.0% $0 0 0.0% $0 2,000 100.0% $2,000 3,500 100.0% $1,750,000 3,500 82.4% $4,375,000 Round I Dilution Early Stage Fund I Early Stage Fund II 700 16.5% $875,000 50 1.2% $62,500 750 17.6% $937,500