FINA 365 Lecture Notes - Lecture 12: Angel Investor, Preferred Stock, Venture Capital
16 Apr 2017
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When a company sells equity to investors for the first time, it is typical to issue preferred stock rather than common stock to raise capital. New company usually doesn"t pay dividends but owners of preferred stock will have a senior claim on assets of the company if it gets into trouble. It is called convertible preferred stock if the owner can convert it into common stock at a future date. You founded your own firm two years ago. Initially contributed 100,000 of your money and received 1500000 shares of stock. You have sold an additional 500,000 shares to angel investor, total is now. Now you are considering raising more capital from a venture capitalist. Vc would invest 6 million and would receive 3 million newly issued shares. Post money valuation is the valuation of the whole firm (old + new shares) at the funding round price. Post-money valuation = pre-money valuation + amount invested.
