Question

You founded your own firm three years ago. You initially contributed $200,000 of your own money and in return you received 2 million shares of stock. Since then, you have sold an additional 1 million shares of stock to angel investors. You are now considering raising capital from a venture capital firm. This venture capital firm would invest $5 million and would receive 2 million newly issued shares in return. Assuming that this is the venture capitalist's first investment in your firm, what percentage of the firm will the venture capitalist own

Answer 1

40%

Step-by-step explanation:

Calculation to determine what percentage of the firm will the venture capitalist own

Using this formula

% ownership = Number of shares owned/Total number of shares

Let plug in the formula

% ownership=2 million shares /(2million shares + 1 million shares + 2million shares )

% ownership= 2million shares/5million shares

% ownership=0.4*100

% ownership=40%

Therefore what percentage of the firm will the venture capitalist own is 40%