Starware Software was founded last year to develop software for gaming applications. The founder initially invested $900,000 and received 8 million shares of stock. Starware now needs to raise a second round of capital, and it has identified a venture capitalist who is interested in investing. This venture capitalist will invest $1.60 million and wants to own 33% of the company after the investment is completed.
a. How many shares must the venture capitalist receive to end up with 33% of the company? What is the implied price per share of this funding round?
b. What will the value of the whole firm be after this investment? (the post-money valuation)?