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!