Part B

On further analysis and discussion, Samantha and John agree to: a) the participating preferred, b) to create an ESOP immediately after Samanthas Series A investment that has 15% share of the company by the end of year 5, and c) that the company will need to raise a $3 million Series B round of financing at the beginning of year 3 to achieve the earnings target by year 5. Series B investors are expected to have a hurdle rate of only 30%, in recognition of the progress made between now and Series B, and will invest in common equity (no participation/conversion preference).

9. Based on this new information, what share of the company should Samantha seek today? What price per share should she be willing to pay?

10. What share of the company will the Round 2 investors seek? What price per share will they be willing to pay?

11. Create a capitalization table to depict the pre-money and post-money valuation, the number of shares and the share price: (i) Before Series A (ii) after Series A (iii) after the creation of the ESOP, (iv) after Series B