CA Final · Advanced Financial Management · Startup Finance
Kiran Foods, a startup, has pre-money valuation of Rs 18 crore. A venture capital fund invests Rs 6 crore for equity. What percentage of the post-money company will the VC fund own, and what is the post-money valuation?
The VC fund owns 25% and post-money valuation is Rs 24 crore. Post-money equals pre-money Rs 18 crore plus Rs 6 crore invested, and ownership is investment divided by post-money, 6/24. Using pre-money as the base would wrongly give 33.33%.
- A25% and Rs 24 croreCorrect
- B33.33% and Rs 18 crore
- C33.33% and Rs 24 crore
- D25% and Rs 18 crore
Explanation
Post-money = pre-money 18 + investment 6 = Rs 24 crore. Ownership = 6/24 = 25%. Dividing the investment by the pre-money (6/18 = 33.33%) is the wrong base and ignores that the new money increases the valuation.
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