Starware Software was founded last year to develop software for gaming applications. The founderinitially invested $900,000 and received 99 million shares of stock. Starware now needs to raise a secondround ofcapital, and it has identified a venture capitalist who is interested in investing. This venturecapitalist will invest $1.00 million and wants to own 26% of the company after the investment iscompleted.
a. How many shares must the venture capitalist receive to end up with 26% of the company? What is theimplied price per share of this funding round?
b. What will the value of the whole firm be after this investment (the post-money valuation)?