You observe the following deal terms:

• Current shares outstanding (including employee pool): 5,000,000 shares of common stock.
• Issued securities: 3,000,000 shares of Series A Convertible Preferred Stock.
• Investment: $3,000,000.
• Original purchase price: $1.00 per share of Series A Preferred.
• Pre-money valuation: $5,000,000.
• Liquidation preference: First pay 2.0 times the Original Purchase Price on each share of Series A Preferred. The balance of any proceeds shall be distributed pro rata to holders of Common Stock.
• Conversion right: The Series A Preferred initially converts 1:1 to Common Stock at any time at option of holder, subject to adjustments for stock dividends, splits, combinations and similar events and as described below under "Anti-dilution Provisions."
• You are an advisor to the founders of the company. Based on this information, how, if at all, would you challenge the valuation and pricing of the issued securities? No calculations needed, but plot a graph, if you think it helps support your argument. How would you try to adjust the deal terms above to accommodate your concerns (again, no calculations needed)?