Question: Starware Software was founded last year to develop software for gaming applications. The founder initially invested $900,000and received12million shares of stock. Starware now needs to

Starware Software was founded last year to develop software for gaming applications. The founder initially invested

$900,000and received12million shares of stock. Starware now needs to raise a second round of capital, and it has identified a venture capitalist who is interested in investing. This venture capitalist will invest$1.20million and wants to own38%of the company after the investment is completed.

a. How many shares must the venture capitalist receive to end up with

38%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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