Question
The founders of a start-up issued themselves 1,000,000 shares of common stock when the company was formed. One year later, a venture investor provided $500,000
The founders of a start-up issued themselves 1,000,000 shares of common stock when the company was formed. One year later, a venture investor provided $500,000 in return for preferred stock shares convertible into 500,000 shares of common stock ($1.00 per share). The venture investor negotiated FULL RATCHET anti-dilution protection at the time of the $500,000 investment. Subsequently the company needed to raise $625,000 and did so by issuing 1,000,000 new shares of convertible preferred stock ($.625 per share). Initial conversion price is $1/share Company sells 1,000,000 new shares at $.625
What are the percentage ownership interests of the Founders, Round 1 and Round 2 investors after the $625,000 Round 2 investment (based on the Round 1 investors FULL-RATCHET anti-dilution protection)? (1)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started