Question: Starware Software was founded last year to develop software for gaming applications. Initially, the founder invested ($900,000) and received 11 million shares of stock. Starware

Starware Software was founded last year to develop software for gaming applications. Initially, the founder invested $$900,000$ and received 11 million shares of stock. Starware now needs to raise a second round of capital, and it has identified an interested venture capitalist. This venture capitalist will invest $$1$ million and wants to own 37% of the company after the investment is completed.

a. How many shares must the venture capitalist receive to end up with 37% of the company?

What is the implied price per share of this funding round?

b. What will the value of the whole firm be after this investment (the post-money valuation)?

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a To calculate the number of shares the venture capitalist must receive to end up with 37 of the company we need to determine the total number of shares after the investment and then find 37 of that t... View full answer

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