Please help me out of this question.
A founder holds 10,000 shares in an early stage company. The seed investor has invested $20,000 as a convertible note with a cap of $16,000 and a discount of 20%. The note converts at the next equity financing round. A new investor emerges who wants to invest $30,000 for a 40% equity interest in the venture, which will result in a post-money value of $75,000.
Cap:
(a) At what value per share would the note convert?
(b) How many shares will the note investor get?
(c) Based on pre-money value and shares, what is the value per share for the new investor?
(d) How many shares would the new investor get for the $30,000 investment?
Discount:
(a) What are the pre- and post-money values?
(b) Find the price per share by solving the simultaneous system with the new investor getting 40% and the entrepreneur and prior investor getting a total of 60% of the shares.
(c) Find the total number of shares and each party's share holdings.
Is one of these alternatives better than the other? If so, which is better? Why?