CA Final · Advanced Financial Management · Startup Finance
Bloom Agritech, a startup, has a pre-money valuation of Rs 18 crore agreed in a term sheet. A venture fund agrees to invest Rs 6 crore for equity. What will be the post-money valuation and the fund's percentage holding immediately after the round (ignoring any option pool)?
Post-money valuation is Rs 24 crore, being the Rs 18 crore pre-money plus the Rs 6 crore investment. The fund holds 6/24, which is 25%. Dividing the investment by pre-money value overstates the stake because the new money also enlarges the company's valuation.
- APost-money Rs 24 crore; holding 25%Correct
- BPost-money Rs 24 crore; holding 33.33%
- CPost-money Rs 18 crore; holding 25%
- DPost-money Rs 12 crore; holding 33.33%
Explanation
Post-money = pre-money + investment = 18 + 6 = Rs 24 crore. Holding = 6/24 = 25%. The 33.33% figure wrongly uses investment divided by pre-money (6/18).
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