VENTURE CAPITAL

Simplified by: Noel Maquiling

Venture Capital Method with Multiple Financing Round

SAMPLE

Exit Value V 25,000,000.00 Year 1 2 3 4

Number of Existing Shares (Founders) x 1,000,000.00 IRR 60% 50% 50% 40%
1+IRR 1.60 1.50 1.50 1.40
Round 1 Round 2 Time of Exit
Valuation at Exit V 25,000,000.00
Compound Discount Rate 1+r Product of 1+IRR 3.6 1.4
Investment Amount I 3,000,000.00 2,000,000.00
Number of Existing Shares x 1,000,000 3,135,593
Post-Money POST V/(1+r) or PRE YR2/1+r YR1 4,404,761.90 17,857,142.86
Pre-Money PRE POST-I 1,404,761.90 15,857,142.86
Ownership Fraction of Investors F I/POST 68.11% 11.20%
Ownership Fraction of Previous Round 1-F 1-F 31.89% 88.80%
Number of New Shares y x[F/(1-F)] 2,135,593 395,480
Total Shares Issued T x/(1-F) or x+y 3,135,593 3,531,073 3,531,073
Price per Share p I/y 1.40 5.06 7.08 V/T at exit

Entrepreneurs:
Ownership Shares x 1,000,000.00 1,000,000.00 1,000,000.00
Ownership Percentage x/T*100% 31.89% 28.32% 28.32%
Wealth x*p 1,404,761.90 5,057,142.86 7,080,000.00
First Round:
Ownership Shares y 2,135,593 2,135,593 2,135,593
Ownership Percentage y/T*100% 68.11% 60.48% 60.48%
Wealth y*p 3,000,000.00 10,800,000.00 15,120,000.00
Second Round:
Ownership Shares y 395,480 395,480
Ownership Percentage y/T*100% 11.20% 11.20%
Wealth y*p 2,000,000.00 2,800,000.00