John Thompson, CEO of NewVenture, Inc., seeks to raise $5 million in equity for his early stage venture in January 2016. NewVenture is a subscription-based software company that has experienced 75% revenue growth over the last year. The company generated $2.5 million of revenue in 2015, with an operating loss of ($450,000). Thompson projects that NewVenture will achieve $30 million in revenue by 2020. Samantha Jones of Gorsuch Capital is considering an investment in January 2016, offering pre-money valuation of $14.75 million. a. What is the post-money valuation of NewVenture? b. What share of the company will Samantha Jones require? c. The company has 1,000,000 shares outstanding before the investment. How many new shares should she purchase, and at what price per share?

Samantha Jones believes Thompson will have to grant generous stock options in addition to the salaries projected in his business plan. From experience, she thinks management should have the ability to own at least a 15% share of the company in the form of options by the end of year 5.

f. What share of the company should Samantha insist on getting today if an option pool is created after her investment? (in order to ensure that she will still maintain the same ownership level noted above) g. How many shares are allocated to Jones and the option pool in this case?