venture capita s s The Your start-up company needs cap al Right now you own 100%

Question

venture capita s s The Your start-up company needs cap al Right now you own 100% o the firm with 9.8 m lion shares. You have received two offers ron million for 1.16 million new shares. The second offers $2.02 million for 541,000 new shares. a. What is the first offer's post-money valuation of the firm? b. What is the second offer's post-money valuation of the firm? c. What is the difference in the percentage dilution caused by each offer? d. What is the dilution per dollar invested for each offer? st offers to nvest

Explanation / Answer

Value of the company with out dilution=$9.8 million.

first offer:

Invest $3.01 millions for 1.16 million new shares.

Number of shares after issuing new shares=1.16+9.8

=10.96 million. shares.

% of new shares to total shares=1.16/10.96

=.1058.

i.e.,10.58%.

For 10.58% price paid =3.01 million

For 100% it is =3.01/10.58%

=$28.4499million.

Answer for question no.b:

$2.02 million for 541000 shares.

Number of shares after the new issue=980000+541000

=10341000 shares.

% of new shares to the total shares=541000/10341000

=5.23%.

Value of these shares=$2.02 million

Therefore value of the firm=$2.02/5.23%

=$38.61 million.

Value per share=$3.01/1.16

=$2.594.

Answer for question no.c:

The difference in % dilution casused by both offers =10.58% - 5.23%

=5.35%

Answer for question no.d:

Dilution per dollar = total dilution/dollars received.

In first case=0.1058/$3,010,000

=0.000000035.

In the second case it is 0.0523/2020000

=0.000000026.

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