Caleb Clark Ventures invests $4 million in convertible preferred stock in a company with an $12 million pre-money valuation. The term sheet shows the investment is non- participating with 1x liquidation preference. a) What is the ownership percentage of the VC after the investment?

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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pls answer a b and c

Caleb Clark Ventures invests $4 million in convertible preferred stock in a company with
an $12 million pre-money valuation. The term sheet shows the investment is non-
participating with 1x liquidation preference.
a) What is the ownership percentage of the VC after the investment?
b) At what exit value is the VC indifferent between either converting or not
converting?
c) Assume the preferred stock is participating. At an exit value of $20,000,000, what
is the payoff to the VC?
Transcribed Image Text:Caleb Clark Ventures invests $4 million in convertible preferred stock in a company with an $12 million pre-money valuation. The term sheet shows the investment is non- participating with 1x liquidation preference. a) What is the ownership percentage of the VC after the investment? b) At what exit value is the VC indifferent between either converting or not converting? c) Assume the preferred stock is participating. At an exit value of $20,000,000, what is the payoff to the VC?
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