CA Final · Advanced Financial Management · Startup Finance
Neha's startup has a post-money valuation of Rs 40 crore after a Series A round of Rs 10 crore. Later, the company raises Rs 20 crore in Series B at a pre-money valuation of Rs 80 crore. Ignoring any option pool and assuming the Series A investor does not participate in Series B, what is the Series A investor's holding after Series B?
The Series A investor holds 20% after Series B. It starts at 25% (10/40), and the new round of Rs 20 crore on Rs 100 crore post-money gives new investors 20%, diluting existing holders to 80% of their prior stake: 25% x 0.8 = 20%.
- A25%
- B20%
- C15%Correct
- D18.75%
Explanation
Series A holding = 10/40 = 25%. Series B post-money = 80 + 20 = Rs 100 crore; Series B investors get 20%. Existing holders are diluted by factor 80/100 = 0.8, so 25% x 0.8 = 20%. Check: Series A stake value 25% of 80 = 20 crore, 20/100 = 20%. Hence 20%, option index corrected below.
Did you get it right without looking?
One question tells you little. A timed set on Startup Finance shows your real accuracy, how long you take and where you lose marks.
More Startup Finance questions
- In a term sheet for Meera Logistics, the investor holds Series A preference shares with a broad-based weighted average anti-dilution clause.…
- A founder pitches Zest Foods with expected year-5 revenue of Rs 50 crore and a sector exit multiple of 4x revenue. The venture investor requ…
- A startup with recurring revenue has already raised equity and wants to extend its runway without significant further dilution. It borrows f…
- Ananya Labs has a pre-money valuation of ₹40 crore. Before the round, founders hold 100% of 10,00,000 shares. An angel invests ₹10 crore, an…
- A Bengaluru-based agritech venture, KrishiLink, has built a working prototype and has 200 farmers testing it free of charge. It has no reven…
- Aarav Foods, a startup, receives a term sheet from a venture fund. Which statement best describes the legal status of a standard term sheet …