yodacaia

I don't think it's that hard. Example:

Let's say VC thinks firm will be worth $50MM at termination in year 5 and wants to invest $5MM now. Also, in year 3, a second round of financing will come in for $2MM. The discount rate for the first 3 years is 40%, and 30% for the last two years. What is the post investment valuation after both rounds, and what % and how many shares do they own after each round?

Oh and owner wants to have 1,000,000 shares.

To get post investment after 2nd round= $50/(1.30)^2 = 29.58
Preinvestment at year 3 = 29.58 - 2 = 27.58
Post investment Year = = 27.58/(1.40)^3 = 10.05

% owned by first round VC investor = $5 / $10.05 = 49.76%

Shares owned by first investor = 1,000,000 * (1/1-.4976) -1,000,000 = 990,445
Price per share = $5,000,000 / 990,445 = $5.05

Now for 2nd round stuff:
% owned by 2nd round investor = $2,000,000 / $29,580,000 = 6.76%
Total shares at this point = Original Total Shares / (1 - 2nd Round Ownership) = 1,990,445 / (1-.0676) = 2,134,785 shares

Price per share = $29,580,000 / 2,134,785 = $13.86

% owned by first round = (1 - 2nd round ownership)*(original ownership) = (1-.0676)*.4976 = 46.39%


Took me 5 minutes and I was making the example up as I was going