Question 1 1/ 1 point Assume the following As Founder of NEC, you initially own

Question

Question 1 1/ 1 point Assume the following As Founder of NEC, you initially own 100% of the 4.0 million shares of commons stock issued by the company. A VC offers to invest $12.0 million in your company at a premoney valuation of $20.0 million. Assume that the VC and you (the Founder) agree to set aside 20% of the company for the employee option pool. What percentage of the company will you own after this financing is completed? Forat 12.34% as 12.34 42.5 (33.33 %) How many shares will be outstanding (of course, include preferred shares as if they were converted into common stock) after the financing? Format 1.234 million shares as 1.234 9412 -V (33.34 %) How many shares will the VC own after this financing? Format 1.234 million shares as 1.234 3.:i2 (33.33 %)

Explanation / Answer

Post money valuation = 20 + 12 = 32 million

after leaving 20% for employee options, normally employee options are deducted from founders share

Founders share = (Pre money / Post meony) - Employee options

= (20/32) - 20% = 62.5% - 20% = 42.5%

42.5 % has 4 million shares,

hence total outstanding = Number of shares / % holding

= 4 / 0.425 = 9.412 million

VC and founder will have 80%, hence VC share is = 80% - 42.5% = 37.5%

VC shares = % holding * total shares

   = 37.5%*9.412 = 3.529 million

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