Question
Jane and Jill created their company, putting $100,000 with a par value per share
of $0.10 and splitting the ownership equally between themselves. Draw the
capitalization table for the company at this point (yes, trivial). Recognizing their
growing business needed to hire talented people, J2 authorized the creation of
50,000 shares to be used to motivate new recruits. The company has so far
granted a total of 30,000 of these shares. Draw the capitalization table for the
company at this point. The company has realized great success and has
determined that it is the right time to raise capital. After numerous rounds of
negotiations with multiple VCs, Gamma VC Partners is chosen to inject
$2,000,000 for 20% fully diluted ownership. As a pre-condition, Gamma VC
Partners asks that the employees option pool be increased by 200,000 shares
prior to the financing. Draw the capitalization table at this point.
Answer & Explanation
, To create the capitalization tables, we need to follow the sequence of events and
calculate the ownership structure at each stage.
Initial Capitalization Table
Total Investment: $100,000
Par Value per Share: $0.10
Total Shares Issued: $100,000 / $0.10 = 1,000,000 shares
Since Jane and Jill split ownership equally:
Jane's Shares: 500,000 shares (50%)
Jill's Shares: 500,000 shares (50%)
After Authorizing and Granting Employee Shares
The company authorized an additional 50,000 shares for employees and granted
30,000 of these.
Authorized Employee Pool: 50,000 shares
Granted Employee Pool: 30,000 shares
The total number of issued and outstanding shares is now:
Jane and Jill created their company, putting $100,000 with a par value per share
of $0.10 and splitting the ownership equally between themselves. Draw the
capitalization table for the company at this point (yes, trivial). Recognizing their
growing business needed to hire talented people, J2 authorized the creation of
50,000 shares to be used to motivate new recruits. The company has so far
granted a total of 30,000 of these shares. Draw the capitalization table for the
company at this point. The company has realized great success and has
determined that it is the right time to raise capital. After numerous rounds of
negotiations with multiple VCs, Gamma VC Partners is chosen to inject
$2,000,000 for 20% fully diluted ownership. As a pre-condition, Gamma VC
Partners asks that the employees option pool be increased by 200,000 shares
prior to the financing. Draw the capitalization table at this point.
Answer & Explanation
, To create the capitalization tables, we need to follow the sequence of events and
calculate the ownership structure at each stage.
Initial Capitalization Table
Total Investment: $100,000
Par Value per Share: $0.10
Total Shares Issued: $100,000 / $0.10 = 1,000,000 shares
Since Jane and Jill split ownership equally:
Jane's Shares: 500,000 shares (50%)
Jill's Shares: 500,000 shares (50%)
After Authorizing and Granting Employee Shares
The company authorized an additional 50,000 shares for employees and granted
30,000 of these.
Authorized Employee Pool: 50,000 shares
Granted Employee Pool: 30,000 shares
The total number of issued and outstanding shares is now:
