An entrepreneur (E) has $1,000 invested in a garage project (assume its value is
ID: 1128424 • Letter: A
Question
An entrepreneur (E) has $1,000 invested in a garage project (assume its value is $O). An angel (A) offers $2MM for 20% of the "company (C)". E and A agree to price the shares at $1 per share. 5. a. What is the value of C? b. What are the pre-money, money, and post-money values of C? c. Provide the capital table for the owners The owners (E and A) need additional funds. A venture capitalist (VC) offers $6MM for 25%. What is the value of the company? What is the share price? d. e. Now consider two different dilution policies to provide VC their shares. i. E provides all the shares. ii. The shares are provided by E and A pari passu based on their previous holdings. f. For each of these policies provide the cap tables. g. What is the "times earned" for E and A? h. Comment on how the dilution policies affect the future returns of E and A.Explanation / Answer
a)
Value of C is given as fololws
For A Value of C is =$2,000,000/0.2=$10,000,000
For E Value of C is $0 at the begining.
b)
Pre Money of C =Post Money of C - Investment
Post Money of C =$20,000000
Investment =$2,000000
Pre Money of C = $18,000,000
d)
Value of the Company is =$6,000,000/0.25=$24,000,000
e)
Pre Money Shares = Pre Money Valuation/Price per share= $10,000,000/$1=10,000,000
Share Price now = $24,000,000/10,000,000 =$2.4