Tai and Anton have started a business. They raise $2 million from their family at a pre-money valuation of $4 million. They give them common stock with no rights to increase their investment in future rounds.
The founders then raise $5 million in Series A at a pre-money of $7 million. For Series B they raise an additional $15 million at a pre-money of $25 million and for Series C they raise $20 million at a pre-money of $65 million. All of these rounds are issued preferred stock with a 1x liquidation preference.
No one has anti-dilution clauses or any other additional rights. An option pool was never established but Anton and Tai shared some of their own stock with employees as the company grew.
Part 1:
What is the percentage ownership of Founders/Employees, Angels (family), Series A, B & C at the end of each round (call the Angel round Seed)?
If the company is sold after Series C for $200 million how much would each group get if each of the Series rounds were done with straight preferred (non-participating)?
If the company is sold for $50 million how much would each group get if each of the Series rounds were done with straight preferred?
Part 2:
Answer questions 2 and 3 assuming each of the Series rounds were participating preferred.
Part 3:
The company runs out of money before completing the sale of the company, and as a result, confidence in management is gone. There is a $10 million loan available – it will be senior to all preferred stock and has a 3x liquidation preference. Answer questions 2 and 3 assuming each of the Series rounds were straight preferred.