Question
Shark A offers entrepreneur B to invest $5m in entrepreneur Bs start-up, for 20% in the start-ups equity. Entrepreneur B, however, believes that the start-up
Shark A offers entrepreneur B to invest $5m in entrepreneur Bs start-up, for 20% in the start-ups equity. Entrepreneur B, however, believes that the start-up has current premoney valuation of $35m and thus counters by making Shark A the following offer: Shark A would invest the $5m in entrepreneur Bs start-up in exchange for alpha percent in the start-ups equity. What pre-money valuation of the start-up does Shark As offer reflect? What is alpha (i.e., the equity stake in the start-up that entrepreneur B is willing to offer Shark A based on entrepreneur Bs counter offer)?
A. $20m; 20.0%
B. $25m; 10.5%
C. $20m; 12.5%
D. $25m; 25.0%
E. $20m; 17.5%
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