Starware Software was founded last year to develop software for gaming applications. The founder initially invested

$ 800 000 and received 8 million shares of stock. Starware now needs to raise a second round of capital, and it has identified a venture capitalist who is interested in investing. This venture capitalist will invest $ 1.00 million and wants to own 20 % of the company after the investment is completed.

a. How many shares must the venture capitalist receive to end up with 20 % of the company? What is the implied price per share of this funding round?

b. What will the value of the whole firm be after this investment (the post-money valuation)?