Hi,

If someone could help me with this question i would appreciate it. I am having trouble getting started, some of the terms are confusing me. Any help would be lovely, thanks!

A start-up company called "Thunderbird" is negotiating its Series A term sheet with a venture capital firm called "Gold Capital". Gold Capital is willing to invest $1 million for 20% of shares of Thunderbird.

Two years prior to the Series A round, the company raised an unpriced seed round. It signed a convertible note with a venture capital firm called "First Capital". The principle amount of note is $100,000 with a 5% non-cumulative interest rate.

The conversion price for the convertible note will be lower of the price calculated as

i) (Option 1) the cash price paid per share for equity securities by the investors in the qualified financing round multiplied by 0.8, and

ii) (Option 2) the quotient resulting from dividing $4,000,000 by the number of outstanding shares of common stock of the company immediately prior to the qualified financing round.

Prior to the seed round financing, founders and management team hold 1 million shares.

1. What will be the conversion price of the convertible note?

2. How many shares will Gold Capital get in the Series A round?

3. Assume that Gold Capital requires 20% shares of Thunderbird and Gold Capital agreed to an investment amount and pre-money valuation that make First Capital indifferent between choosing Option 1 and Option 2. What is the new post-money valuation after the negotiation?

Once again, thank you very much!