What is the ownership percentage of the VC

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Question - A VC invests $3 million in convertible preferred stock in a company with a $9 million pre-money valuation. The term sheet shows the investment is non-participating with 1x liquidation preference.

Required -

a) What is the ownership percentage of the VC after the investment?

b) At what exit value is the VC indifferent between either converting or not converting?

c) Assume the preferred stock is participating. At an exit value of $16,000,000, what is the payoff to the VC?

d) Assume the preferred stock is participating. At an exit value of $16,000,000, what is the payoff to the common stockholders (i.e. Founders & Management)?

e) If the VC owned non-participating convertible preferred stock with a 2x liquidation preference at what exit value is the VC indifferent between either converting or not converting?

Reference no: EM132788901

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