Ockham technologies is considering three options for raising money. They ideally want to raise $2M now and raise more money later. The offers are:

1. Texas Angels:

-Put in $10M for 50% of the company

-Have one board seat (so board would be 2 founders, 1 investor)

-They have no knowledge of the industry

2. Noro-Moseley:

- put $2M in at a pre-money valuation of $4M

- Have 2 board seats and add one outsider (so board would be 2 founders, 2 VCs, 1 outsider)

- Large VC with expertise & status

3. Monarch Capital

- Put in $1.5M for 33.33% of the company

- No board seats (so board would be 2 founders)

- Small VC with expertise

1) For each option, list the:

a. Pre-money valuation

b. Amount invested

c. Post-money valuation

d. Percentage of the company owned by the VCs

2) Which investment should Ockham take and why?

3) Assume Ockham takes the Noro-Moseley investment, and that in a second later round Noro-Moseley invests an additional $8M.

a. What pre-money valuation would Noro-Moseley have to agree to in order for Ockhams founders to be less diluted than they would have been if they had taken the Texas Angels deal?

b. What step-up would that valuation represent from the first round?

c. What do these numbers imply about the risk of taking the Noro-Moseley deal for the first round instead of the Texas Angel deal?