QUESTION TWO [30 MARKS] A VC invests $3 million in convertible preferred stock in a company with a $9 million pre-money valuation. The term sheet
QUESTION TWO [30 MARKS]
A VC invests $3 million in convertible preferred stock in a company with a $9 million pre-money valuation. The term sheet shows the investment is non-participating with 1x liquidation preference.
Each part is worth 6 marks. Answer the following:
- What is the ownership percentage of the VC after the investment?
- At what exit value is the VC indifferent between either converting or not converting?
- Assume the preferred stock is participating. At an exit value of $16,000,000, what is the payoff to the VC?
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Authors: William O. Cleverley, James O. Cleverley
8th Edition
1284094634, 978-1284094633
