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CA Final · Advanced Financial Management · Startup Finance

Rohan Mobility, a startup, has 10,00,000 shares outstanding. In Series A it issues 2,50,000 shares at Rs 200 each. In Series B a year later, a new investor puts in Rs 10 crore at a pre-money valuation of Rs 40 crore, based on the shares outstanding after Series A (no other issues). What percentage of the post-Series B company do the Series A investors hold?

Series A investors hold 16%. After Series A they own 2,50,000 of 12,50,000 shares. Series B at Rs 320 per share issues 3,12,500 shares, making 15,62,500 in total. Their stake is 2,50,000 divided by 15,62,500, which is 16%, equal to 20% diluted by 40/50.

  1. A20.0%
  2. B16.0%Correct
  3. C14.0%
  4. D12.5%

Explanation

After Series A shares = 12,50,000; Series A holds 2,50,000 (20%). Series B price = 40,00,00,000/12,50,000 = Rs 320. New shares = 10,00,00,000/320 = 3,12,500. Total = 15,62,500. Series A share = 2,50,000/15,62,500 = 16%. Check: dilution factor 40/50 = 0.8, so 20% x 0.8 = 16%. 20% ignores dilution.

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