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CA Final · Advanced Financial Management · Startup Finance

Spark Foods Pvt Ltd, a startup, has a pre-money valuation of ₹18 crore. A venture capital fund invests ₹6 crore for new equity shares. What percentage of the post-money company will the VC fund hold?

The VC fund will hold 25%. Post-money valuation equals pre-money ₹18 crore plus the new investment of ₹6 crore, which is ₹24 crore, and the investor's stake is ₹6 crore divided by ₹24 crore. Dividing by pre-money value would wrongly give 33.33%.

  1. A25%Correct
  2. B33.33%
  3. C20%
  4. D30%

Explanation

Post-money valuation = 18 + 6 = ₹24 crore. VC stake = 6/24 = 25%. Using 6/18 = 33.33% wrongly divides by the pre-money value instead of post-money.

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