Find the total number of shares

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A founder holds 10,000 shares in an early stage company. The seed investor has invested $20,000 as a convertible note with a cap of $16,000 and a discount of 20%. The note converts at the next equity financing round. A new investor emerges who wants to invest $30,000 for a 40% equity interest in the venture, which will result in a post-money value of $75,000.

Cap:

(a) At what value per share would the note convert? 

(b) How many shares will the note investor get?

(c) Based on pre-money value and shares, what is the value per share for the new investor? 

(d) How many shares would the new investor get for the $30,000 investment?

Discount:

(a) What are the pre- and post-money values?

(b) Find the price per share by solving the simultaneous system with the new investor getting 40% and the entrepreneur and prior investor getting a total of 60% of the shares.

(c) Find the total number of shares and each party's share holdings.

Is one of these alternatives better than the other? If so, which is better? Why?

Reference no: EM131466309

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