Securenet Inc
Introduction
SecureNet INC, a software enterprise that focuses on the e-commerce security, is trying to raise a first round of funding in October 2000. The company has been unsuccessful in attracting funding from venture capitalists, and raised a small round seeds from local investors in Virginia. In the following two month, SecureNet financed a $250,000 bridge loan from an Angel investor called Trio LLC. Trio has proposed to offer a $ 1.4 million a Series A funding of convertible preferred stock. Right now, Richard Goodson, the CEO of SecureNet must decide whether to accept the offer from Trio LLC, or come back to find other VC investors.
Goodson are considering the decision base on two main dimensions. First is the investing experience of Trio LLC. As a General Partner, VC firms are responsible to monitoring and helping the portfolio companies. Therefore, a more experienced manage teams will provide more professional advices to the portfolio companies. Second is the funding amount. Although $1.4 million of series A funding is nearly 40% of company’s equity, SecureNet may still need additional funding to build the sale forces and revenue. Looking for other venture capitalists that can offer more funding might be a preferential consideration.
Question Solution
1. All the calculation will be showed in Table 1 in appendix. In the part one, the price per share prior to Series A funding will be $4.38, and the value of SecureNet before Series A funding is $3,113,966. In the part two, based on the convertible preferred stock price at $4.38, the total investment for purchasing preferred stock is $1.9 ($1.4 +0.5) million. Therefore, the price per share after Series A funding will be $4.38, and the fully diluted share count will be 1,144,741 shares, thus the value of SecureNet after Series A funding will be $5,013,965.58.
2. Based on the information from the Table 2 in appendix, we can calculate the number of shares that another investor can purchase within $3
SecureNet INC, a software enterprise that focuses on the e-commerce security, is trying to raise a first round of funding in October 2000. The company has been unsuccessful in attracting funding from venture capitalists, and raised a small round seeds from local investors in Virginia. In the following two month, SecureNet financed a $250,000 bridge loan from an Angel investor called Trio LLC. Trio has proposed to offer a $ 1.4 million a Series A funding of convertible preferred stock. Right now, Richard Goodson, the CEO of SecureNet must decide whether to accept the offer from Trio LLC, or come back to find other VC investors.
Goodson are considering the decision base on two main dimensions. First is the investing experience of Trio LLC. As a General Partner, VC firms are responsible to monitoring and helping the portfolio companies. Therefore, a more experienced manage teams will provide more professional advices to the portfolio companies. Second is the funding amount. Although $1.4 million of series A funding is nearly 40% of company’s equity, SecureNet may still need additional funding to build the sale forces and revenue. Looking for other venture capitalists that can offer more funding might be a preferential consideration.
Question Solution
1. All the calculation will be showed in Table 1 in appendix. In the part one, the price per share prior to Series A funding will be $4.38, and the value of SecureNet before Series A funding is $3,113,966. In the part two, based on the convertible preferred stock price at $4.38, the total investment for purchasing preferred stock is $1.9 ($1.4 +0.5) million. Therefore, the price per share after Series A funding will be $4.38, and the fully diluted share count will be 1,144,741 shares, thus the value of SecureNet after Series A funding will be $5,013,965.58.
2. Based on the information from the Table 2 in appendix, we can calculate the number of shares that another investor can purchase within $3