Question
WizzyWidget is a promising startup. They project the following cumulative cash balances (in millions): 1 2 3 4 5 -1.6 -2.7 -4.6 -2.6 1.2 Their
WizzyWidget is a promising startup. They project the following cumulative cash balances (in millions):
1 2 3 4 5
-1.6 -2.7 -4.6 -2.6 1.2
Their conclusion is that they would need to raise 5 million to meet their needs. However this would be too dilutive and therefore they set out to raise 3 million, i.e. what is needed to make it through the first two years, and then raise an additional 2 million in a Series B round. The company expects an exit at the end of year 4 at a valuation of 25 million. The CEO agrees on a 50%discount rate. Calculate the stakes of the founder (assume one single founder with 100% of the shares), the Series A investor and the Series B investor.
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