Dan invested $100,000 to start a company and received 1,000,000 shares of Series A common stock. Since then, the company has been through three additional funding rounds of financing:

Round Price Per Share Number of Shares

Series B $0.75 500,000

Series C $1.25 300,000

Series D $3.50 200,000

Let X be the pre-money valuation for the Series D funding round, Y be the post-money valuation for the Series D funding round, and Z be the percentage of the firm that Dan owns after the last funding round.

Determine X, Y, and Z.

X = $6,300,000

Y = $7,000,000

Z = 10%

Explanation:

NB: Investment = Price * Number of shares

For Series A:

Number of shares = 1,000,000

Price = Number of shares/Initial Investment

Price = 1,000,000/100,000 = 10

Investment = 1,000,000 * 10 = $10,000,000

For Series B

Price = $0.75

Number of shares = 500,000

Investment = 500,000 * 0.75 = $375,000

For Series C

Price = $1.25

Number of shares = 300,000

Investment = 300,000 * 1.25 = $375,000

For Series D

Price = $3.50

Number of shares = 200, 000

Investment = 3.50 * 200,000 = $700,000

Total shares = 1,000,000 + 500,000 + 300,000 + 200,000 = 2,000,000

Y = Post-money valuation for the series D funding round

Y = Series D investment * (total post investment share) / (Shares issued for series D)

Y = 700,000 * (2,000,000) / (200,000) = $7,000,000

Y = $7,000,000

X = Pre-money valuation for the series D

X = Post-money valuation - New Investment (Series D)

X = $7,000,000 - $700,000

X = $6,300,000

Z = Percentage of the firm that Dan owns after the last funding round

Z = (Number of shares of series D / Total number of shares) * 100%

Z = (200,000/2,000,000) * 100%

Z = 10%