Suppose a VC fund invests $10M for 20% of a startup in the form of convertible preferred
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Question:
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?
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