The correct answer to yesterday’s question is $5.84 million. Here is the calculation:

- Tranche 1: VC gets 50% for $5 million
- Tranche 2: VC gets 25% for $4 million
- Tranche 3: VC gets 16.7% for $4 million

So, after Round 1, the VC owns 50%.

After Round 2, the VC owns ~~(50% * 25%) + 25% = 37.5%~~ (50%*25%) + 50% = 62.5% *[PS: Apologies for this error.]*

After Round 3, the VC owns (62.5% * 83.7%) + 16.7 = 69%

So, the VC has invested $13 million for a 69% stake over three tranches. Therefore, the blended pre-money (the value of the other 31%) is $5.84 million.

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Rajesh, the question you had asked was:

“What is the effective (blended) pre-money valuation of the company AFTER the $13 million has been invested”

so AFTER the 13 million is invested the value would be $18.9 M. (I had left this answer on ur earlier post as well)

There is a small mistake in After Round 2 calculation.

Certainly one mistake after Round 2. After each investment the VC must own more share. Should be between 50%-69%. Maybe 62.5 %

At least I know what blended pre-money means.

From yesterday question “Even VCs who are supposed to know investing got the calculation wrong in this case!”. Not only 🙂

i guess.. calculating the promoter’s dilution is much simpler..

Tranche 1 : 50% investor and 50% promoter

Tranche 2 : 25% further dilution of promoter i.e. 25% of 50% i.e. 12.5% so balance 37.5%

Tranche 3: 16.7% further dilution of promoter i.e. 16.7% of 37.5 % i.e. 6.2625% so balance 31.2375% with promoter which means 68.7625% with VC