Eonomics Continued Question Q1-Q6. Suppose a startup requires financing of 5 million dollars and it is raised in two rounds. The 1st round VC provides 3 million dollars now and the discount rate is 60%. The 1st round VC’s investment period is four years. The 2nd round VC provides 2 million dollars in year 2. The 2nd round VC’s investment period is two years and the discount rate is 50%. The startup is expected to earn 4 million dollars in year four and should be comparable to companies with PE ratio of 25. The Round 1 VC’s current % ownership is 20.6% and the Round 2 VC’s current % ownership is 4.5%. Shares outstanding before Round 1 was 1,000,000 shares. (On some questions, your answer may include a dollar sign, or a percent sign. You should not include these symbols in your answer.) Q1. How many new shares VC should purchase at 1st round? (Round the result to the nearest whole number) Q2. How much shares outstanding before Round 2? Q3. How many new shares round 2 VC should purchase at 2nd round? (Round the result to the nearest whole number) Q4. How many shares outstanding after Round 2? Q5. What price per share should Round 1 VC agree to pay? (Use the answer in Q1 and round the result to one decimal place) Q6. What price per share should Round 2 VC agree to pay? (Use the answer in Q3 and round the result to one decimal place)
Eonomics
Continued Question Q1-Q6. Suppose a startup requires financing of 5 million dollars and it is raised in two rounds. The 1st round VC provides 3 million dollars now and the discount rate is 60%. The 1st round VC’s investment period is four years. The 2nd round VC provides 2 million dollars in year 2. The 2nd round VC’s investment period is two years and the discount rate is 50%. The startup is expected to earn 4 million dollars in year four and should be comparable to companies with PE ratio of 25. The Round 1 VC’s current % ownership is 20.6% and the Round 2 VC’s current % ownership is 4.5%. Shares outstanding before Round 1 was 1,000,000 shares. (On some questions, your answer may include a dollar sign, or a percent sign. You should not include these symbols in your answer.) Q1. How many new shares VC should purchase at 1st round? (Round the result to the nearest whole number) Q2. How much shares outstanding before Round 2? Q3. How many new shares round 2 VC should purchase at 2nd round? (Round the result to the nearest whole number) Q4. How many shares outstanding after Round 2? Q5. What price per share should Round 1 VC agree to pay? (Use the answer in Q1 and round the result to one decimal place) Q6. What price per share should Round 2 VC agree to pay? (Use the answer in Q3 and round the result to one decimal place)
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