You are the Founder of PracticeCo (PC), a successful startup. To get started, you initially raised $3MM from Angel in exchange for 30% of PC common stock.

The existing capitalization of PC is set-forth below. It is now January 2, 2015 and PC needs $3MM in additional capital to continue growing. You have been negotiating with a venture capital fund called VC. VC has proposed purchasing 150,000 new shares for $3MM.

Founder  700,000 Shares

Angel       300,000 Shares

a. Per VC's proposal, what is PC's pre-money valuation?

b. What percentage of PC will VC own?

c. Angel bought his shares in a deal where the post-money valuation was $10MM. What multiple of invested capital (MOIC) would the valuation represented by VC's proposed investment represent to Angel?

d. Assuming VC crafted its offer using the Venture Capital Method of valuation, and that it expects a 5.0x return of invested capital, what is the implied exit valuation of PC?

Answer rating: 100% (QA)

a To determine PCs premoney valuation based on VCs proposal we need to divide the proposed investment amount 3MM by the number of new shares being iss... View the full answer