QUESTION TWO 30 MARKS A VC invests $3 million in convertible preferred stock in a company with a $9 million pre money valuation The term sheet shows the investment is non participating with 1x liquidation preference Each part is worth 6 marks Answer the following What is the ownership percentage of the VC after the investment At what exit value is the VC indifferent between either converting or not converting Assume the preferred stock is participating At an exit value of $16,000,000, what is the payoff to the VC

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Question: QUESTION TWO [30 MARKS] A VC invests $3 million in convertible preferred stock in a company with a $9 million pre-money valuation. The term sheet

QUESTION TWO [30 MARKS]

A VC invests $3 million in convertible preferred stock in a company with a $9 million pre-money valuation. The term sheet shows the investment is non-participating with 1x liquidation preference.

Each part is worth 6 marks. Answer the following:

What is the ownership percentage of the VC after the investment?
At what exit value is the VC indifferent between either converting or not converting?
Assume the preferred stock is participating. At an exit value of $16,000,000, what is the payoff to the VC?

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