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You founded your own firm three years ago.You initially contributed $200,000 of your own money and in return you received 2 million shares of stock.Since then,you have sold an additional 1 million shares of stock to angel investors.You are now considering raising capital from a venture capital firm.This venture capital firm would invest $5 million and would receive 2 million newly issued shares in return.
-Assuming that this is the venture capitalist's first investment in your firm,what percentage of the firm will the venture capitalist own?

Question

Quizplus · Accepted Answer

Before the venture capitalist's investment: 
Founder owns 2 million shares out of 3 million total shares, or 66.67% 
Angel investors own 1 million shares out of 3 million total shares, or 33.33%

If the venture capitalist invests $5 million and receives 2 million newly issued shares: 
Founder still owns 2 million shares 
Angel investors still own 1 million shares 
Venture capitalist owns 2 million shares out of 5 million total shares, or 40%

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