What is the impact on the founders’ and round one investors’ final ownership assuming the second round is funded by outsiders? % Owned by first rondo and Founder Total Shares At Exit Second Round Final Ownership First Round Final Shares Owned Founder Final Shares Owned 88. 80% 14. 21% 74. 59% 1 . Compare these to your results for Part C. Compared to the results in part C, first round of investors will keep more percent of 2. Who bears the dilution from an anticipated round?
Founders bear the cost of all rounds anticipated by the first round of investors 3. Who bears the dilution from an unanticipated round? Fist round of investors fail to anticipate a second round. This might cause this first round investors will bear some of the dilution E. Suppose that the deal is priced assuming the second round (as in Part C) and it turns out to be unnecessary. Comment on the final ownership percentages at exit (year 3). What do you conclude about the impact of anticipated but unrealized bequest financing rounds?
At the beginning, the first round investors got a share allocations that protected them from second round dilution, while the founders bearded the hedging of the first round investors. In the other hand, if the second round never arrives, first round investors will benefit a lot because they din ‘t bear the anticipated dilution. Meanwhile, founders and first round would not have an incentive to have a bonus arrangement unless this help them to avoid a second round.
