Suppose a VC fund invests $10M for 20% of a startup in the form of convertible preferred stock with a 1x liquidation preference and a $100M automatic conversion threshold. Assuming the startup does not raise any additional rounds of financing in the future:

 

a) How much will the VC fund get if the startup is acquired for $40M?

 

b) How much will the VC fund get if the startup is acquired for $200M?

 

c) How much will the VC fund get if the startup goes public and is valued at $200M at the time the VC fund can sell its shares?

Answer rating: 100% (QA)

To calculate the amount the VC fund will receive in different scenarios we need to consider the terms of the investment including the convertible pref... View the full answer