Question
An investor purchased a Convertible Note of Company XYZ for $500,000 with a $5 million valuation cap. The Convertible Note is protected against dilution from
An investor purchased a Convertible Note of Company XYZ for $500,000 with a $5 million valuation cap. The Convertible Note is protected against dilution from the creation of a future employee stock option pool. Company XYZ later raises $5 million in a Series A round of financing at a $20 million post-money valuation. The Series A financing terms include a provision that the company must create a stock option pool that will equal 5% of the companys fully diluted shares after giving effect to the sale of the Series A Preferred. Company XYZ currently has 4 million shares of common stock outstanding.
a) What will be the capitalization table of the Company XYZ after the Series A financing round?
Number of Shares % Common Stock Employee Shares SAFE Preferred Stock Series A Preferred Stock TotalStep by Step Solution
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