Lots of Stuff Enterprises (LSE), Inc., is an online marketplace for pre-owned jewellery with 1 million shares of common stock outstanding. Jill Thompson, the CEO of LSE, Inc., seeks to raise $5 million from institutional investors. HotVentures, a VC specialized in e-commerce, has offered to fund the $5 million. HotVentures has offered Jill a choice between two term sheets: 1) Standard convertible preferred equity for a 45% VC ownership. 2) Participating convertible preferred stock (1x participation) for a 40% VC ownership. When investors value their participation in a Series A funding round it is common practice to use exclusively the equity component of a deal, and ignore any preference and participation features in the term sheet. Using this simplified approach (as presented in class), what is the post-money valuation with convertible preferred? (Please enter your answer in millions of dollars with two decimals, i.e., if your answer is $12,345,678 then you should enter the number 12.34).

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To calculate the postmoney valuation with convertible preferred we need to determine the valuation o... View the full answer