An investor purchased a Convertible Note of Company XYZ for $500,000 with a $5 million valuation cap.
Question:
An investor purchased a Convertible Note of Company XYZ for $500,000 with a $5 million valuation cap. The Convertible Note is protected against dilution from the creation of a future employee stock option pool. Company XYZ later raises $5 million in a Series A round of financing at a $20 million post-money valuation. The Series A financing terms include a provision that the company must create a stock option pool that will equal 5% of the company's fully diluted shares after giving effect to the sale of the Series A Preferred. Company XYZ currently has 4 million shares of common stock outstanding.
a) What will be the capitalization table of the Company XYZ after the Series A financing round?
Engineering Economic Analysis
ISBN: 9780195168075
9th edition
Authors: Donald Newnan, Ted Eschanbach, Jerome Lavelle