dilution effect after multi-round financing.

CFA Level II Alternative Investments
#1

Dear, I cannot understand the dilution effect after multi-round financing.

For example,

of share for founder: 1mil.

Fraction of P/E on 1st round: 38%

of Share of P/E on 1st round: 612,903

and, fraction of P/E on 2nd round: 8.45%

of share of P/E on 2nd round: 148,870

–> then, I think that total fraction after 2nd round would (612,903+148,870)/(1mil.+612,903+148,870)=43.2%

But, the answer was 34.79%; 38%*(1-8.45%)

Please leave precious comments for me!

Thanks alot :smiley:

#2

which topic is this? and how come you posted the question twice?

#3

hi it’s for P/E in Alternative Investments.: Calculating shares issued and share proce for a second round financing.

#4

You are assuming that the 1st round VC investor and 2nd round VC investor is the same. The question seems to ask the share of 1st round VC investor after the 2nd round. Is that correct?

#5

yes!!!