Posted: September 16th, 2017
Starware Software was founded last year to develop software for gaming applications.
Starware Software was founded last year to develop software for gaming applications. Initially,
the founder invested $800,000 and received 8 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 20% of the company after the investment
is completed.
a. How many shares must the venture capitalist receive to end up with 20% 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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