Starware Software was founded last year to develop software for gaming applications. The founder initially invested $1,000,000 and received 10 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 $1.60 million and wants to own 31% of the company after the investment is completed. a. How many shares must the venture capitalist receive to end up with 31% 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 $1,000,000 and received 10 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 $1.60 million and wants to own 31% of the company after the investment is completed. a. How many shares must the venture capitalist receive to end up with 31% 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)?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Starware Software was founded last year to develop software for gaming applications. The founder initially invested $1,000,000 and received 10 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 $1.60 million and wants to own 31% of the company after the
investment is completed.
a. How many shares must the venture capitalist receive to end up with 31% 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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