The venture Interactive.com anticipates that it will need $12,000,000 in venture capital to achieve a...
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The venture Interactive.com anticipates that it will need $12,000,000 in venture capital to achieve a terminal value of $500,000,000 in five years.
The founder of Interactive.com wants to have a venture investor inject $12,000,000 in three rounds of $4,000,000 at time 0, 2 and 4 with time 5 exit value of $500,000,000. If the founder anticipates returns of 60%, 40% and 20% for round 1, 2 and 3, respectively: (a) what percent of ownership is sold during the first round? (b) During the second round? (c) During the third round? (d) What is the founders year-five ownership percentage?
Question B1:
a) Round 1 ownership % sold:
b) Round 2 ownership % sold:
c) Round 3 ownership % sold:
d) Founders ownership % in year 5:
Question B2:
Assuming the founder currently has 12,000 shares, (a) what will be the total number of shares after all investment rounds, (b) how many shares will be issued in round 3, and (c) what is the third round share price?
Total number of shares in year 5:
Number of shares issued in round 3:
What is the third round share price?
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