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Andrew founded his own firm three years ago. He initially contributed $200,000 of his own money and in return he received 2 million shares of
Andrew founded his own firm three years ago. He initially contributed $200,000 of his own money and in return he received 2 million shares of stock. Since then, he has issued and sold an additional 1 million shares of stock to angel investors. He is now about to raise capital from a venture capital firm. This venture capital firm will invest $4 million and will receive 2 million newly issued shares in return. a) How much will the venture capitalist be paying for each share? (4 marks) b) Compute the valuation of the firm and of Andrew's shares after the venture capital funding. (6 marks) c) Compute the percentage of ownership of each investor after the venture capital funding. (6 marks) d) What was Andrew's percentage ownership and the angels' percentage ownership in the company immediately following the angel investor's investment? (4 marks)
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