Ace Tech Pvt. Ltd., is a start up that requires funding of ₹5 crore for expansion. The promoters approach the following: An Angel Fund willing to invest ₹1 crore at a pre-money valuation of ₹4 crore A Venture Capital Fun

Answer 4(a) (i) Angel Fund Investment Pre-money valuation = ₹4 crore Investment = ₹1 crore Post-money valuation = ₹5 crore Angel's ownership: 1/5 = 20% (ii) Shares issued to Angel Let total shares after Angel investment = X Promoters holding = 80% Angel Holding = 20% Shares issued to Angel = (1,00,000/80) x 20 = 25000 shares Price per share for Angel Fund Value per share = ₹1 crore / 25000 = ₹400 Venture Capital Fund Investment Investment by Venture Capital Fund = ₹4 crore Post-money valuation = ₹10 crore VCF's ownership: 4/10 = 40% Total shares after VCF investment Shareholding by Promoters and Angel investors i.e. 60% = 1,25,000 shares Existing shareholders = (1,25,000/60) × 100 = 2,08,333 shares (approx.) VCF shares = 2,08,333 - 1,25,000 = 83,333 shares Price per share for VCF ₹4,00,00,000 / 83,333 = ₹480 per share Final Shareholding Pattern Shareholder Shares % Holding Promoters 1,00,000 48% Angel Fund 25,000 12% VCF 83,333 40% Total 2,08,333 100% (iii) Control Implications Promoters' holding reduced from 100% to 48% They lose majority control (<50%) VCF becomes a significant shareholder (40%), may demand board seats Angel investors have minor but strategic influence