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Summary QuestionJane and Jill created their company, putting $100,000 with a par value per share o
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Jane and Jill created their companyQuestionJane 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...

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  • October 6, 2024
  • 6
  • 2024/2025
  • Summary

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  • putting 100
  • 000 sha
  • jane and jill created their companyquestionjane an
  • 000 with a par value per share of 010 and splitt
  • trivial recognizing their growing business need
  • j2 authorized the creation of 50

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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:

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