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Cap Table Practice Problem 1

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ctyre34
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44 views

Cap Table Practice Problem 1

Uploaded by

ctyre34
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Your Name ________________________

Business 436 – Cap Table Practice Problem 1:


You founded a company a year ago, and things are going well – but you need to raise
venture capital to take it to the next level. You own all of the company now, in the form
of a corporation where you own 100% of the stock.

You have an offer from Cool Ventures to invest in your company under the following
terms:

Part One:

Investment amount = 2,000,000 @ $1/share

Pre-money valuation = $3,000,000

Stock option pool to be created of 10% of company shares (ownership) before the
investor puts their money in.

Create a cap table that shows the company after the investment has been made. Then
answer the following questions.

What is the post-money valuation?

How many shares do you now own after the Series A?

How many shares does Cool VC own?


Part Two:

Now, another investor, Rich VC, wants to invest in a Series B Round for this
company. She is willing to invest $4M at $4 per share. Cool VC decides, based
upon their rights as an investor, to invest more money at the same terms as Rich
VC such that they do not suffer any dilution after Series B is finished (in other
words, they own the same share of the company after this round as they did
before.)

What will the new cap table look like?

Final Question:

If the company now sells for $35,000,000 with no further investment after the Series B
round, what is the cash-on-cash* return for the Cool VC:

Amount Cool VC gets out of the sale =

Total amount Cool VC invested =

Cash on cash =

*
Cash on cash return is simply computed in these types of transactions by dividing the
total cash they got out by the total cash they put in.

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