Whole Network Creative Weblog... Entrepreneurshi... Events Jobs Sponsored Post Technology Venture Capital

 

what's pro-rata?

Filed in archive Venture Capital by tj on September 8, 2004

"Pro-rata" investments explained - courtesy of Seth Levine of Mobius.

"he best way to illustrate the complexity of this concept is to take a look at a couple of examples. Take the case of a Series A round for ProRata Corp. Assume the post money on the deal is $8m and each investor, having invested $2m each, ends up owning 25% of the business. Fast forward to the Series B financing and consider two scenarios. In the first scenario there is no outside investor and the company raises $6m. Logically, each investor would contribute $3m to the financing, as each was responsible for 50% of the prior financing round. Note that this would leave them each owning just under 36% of the business post financing -- meaning that by some definitionslinks they actually played above their pro-rata amount because they have each increased their ownership in the business. Now consider the same case where a new investor is brought into the mix in the Series B. Assuming this investor takes $2m of the $6m round, is the pro-rata for the remaining investors $2m (half of the remaining $4m)? It could also be $1.5m (which, in the $6m round would allow the investor to retain their 25% ownership). "






Permalink: what's pro-rata?
Tags: vc  terms  rata  entrepreneurship  technology  venture+capital  please+enter  hedge+funds 

Trackback: http://www.creative-weblogging.com/cgi-bin/mt-tb.pl/3137





RSSrss   | See all blog subscribe options
Google google   |   What is RSS?
Yahoo! yahoo
Addthis Subscribe using any feed reader!
Bloglines Bloglines
Newsletter
Grouptivity

Use the search to look for other interesting posts



 
  • Advertise with us

  • Learn more about our advertising options or email advertising - at - creative-weblogging.com or give us a call at +1 (650) 331 4900.


  • Testimonials

  • 'After visiting your site, I feel that your articles are very enriching and aspiring, and I learnt a lot after reading your articles on entrepreneurship...'

    Asia, Singapore

    'I really look forward to reading content from your site. You really do a great job of keeping yourself and (your readers like myself) ahead of the pack.' Asia, India

    '...very inspiring! Really like your site!' Europe, Netherlands

    'BTW I m addicted to your website :)' Europe, France



  • Other blogs in the same channel in the Creative Weblogging Network







 

Tagcloud: Creative Weblogging Entrepreneurship Events Global Economy Jobs Politics Sponsored Post Technology Venture Capital