Problem: Delta software was founded last year to develop software for gaming applications. The founder initially invested $800,000 and received 8 million shares of stock. Delta 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 million and wants to own 20% of the company after the investment is completed.
1) How many shares must the venture capitalist receive to end up with 20% of the company? What is the implied price-per-share of this funding round?
2) What will the value of the whole firm be after this investment (the post money valuation)?