Valuation Question

Here is a question for the mathematically inclined.

Consider a company that is planning to raise money. A VC offers it $13 million in 3 tranches:

  • Tranche 1: Pre-money of $5 million, VC invests $5 million
  • Tranche 2: Pre-money of $12 million, VC invests $4 million
  • Tranche 3: Pre-money of $20 million, VC invests $4 million

What is the effective (blended) pre-money valuation of the company after the $13 million has been invested?

I ask this question because it requires some calculations and understanding of how investing works. Even VCs who are supposed to know investing got the calculation wrong in this case!

Answer tomorrow.