Question

A venture with 2 million total common shares – 1.4 million owned by the entrepreneur and...

A venture with 2 million total common shares – 1.4 million owned by the entrepreneur and 0.6 million by an angel investor – had a post‐money value of $8 million after its last (and only) round of outside financing. The company has run into some development delays and needs to raise additional capital. A new investor offers $500,000 in exchange for 200,000 new common shares.

Part 1. How much is the entrepreneur's stake worth after the $500,000 investment?

Part 2. After the $500,000 investment, how is the ownership divided among the entrepreneur, angel, and new investor?

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Answer #1

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