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An entrepreneur first started his business with $100,000. Later, a venture capitalist (VC) agrees to invest...

An entrepreneur first started his business with $100,000. Later, a venture capitalist (VC) agrees to invest $300,000 to sustain the growth. In return, this VC will take up a 50% equity position in the firm. How much is this business worth now? (Show your calculations)

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Answer #1

when the venture capitalist is buying the 50% stake for $3,00,000, it would mean that the other 50% would also be valued around $3,00,000.

This business is worth now=[amount paid by the venture capitalist/stake purchased by the venture capitalist]

= [ 3,00,000/50%]

= $6,00,000

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