Starware Software was founded last year to develop software for gaming applications. The founder initially invested $900,000 and received 8 million shares of stock. Starware now needs to raise a second round of capital, and it has identified a venture capitalist who is interested in investing. This venture capitalist will invest $1.40 million and wants to own 12% of the company after the investment is completed. a. How many shares must the venture capitalist receive to end up with 12% of the company? What is the implied price per share of this funding round? b. What will the value of the whole firm be after this investment (the post-money valuation)?
Starware Software was founded last year to develop software for gaming applications. The founder initially invested $900,000 and received 8 million shares of stock. Starware now needs to raise a second round of capital, and it has identified a venture capitalist who is interested in investing. This venture capitalist will invest $1.40 million and wants to own 12% of the company after the investment is completed. a. How many shares must the venture capitalist receive to end up with 12% of the company? What is the implied price per share of this funding round? b. What will the value of the whole firm be after this investment (the post-money valuation)?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation
Section: Chapter Questions
Problem 9MC
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Question
Starware Software was founded last year to develop software for gaming applications. The founder initially invested
$900,000
and received
8
million shares of stock. Starware now needs to raise a second round of capital, and it has identified a venture capitalist who is interested in investing. This venture capitalist will invest
$1.40
million and wants to own
12%
of the company after the investment is completed.a. How many shares must the venture capitalist receive to end up with
12%
of the company? What is the implied price per share of this funding round?b. What will the value of the whole firm be after this investment (the post-money valuation)?
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