EBV is considering an investment in Softco, an early-stage software company. If Softco can execute on its
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EBV is considering an investment in Softco, an early-stage software company. If Softco can execute on its business plan, then EBV estimates it would be five years until a successful exit, when Softco would have about $75M in revenue, a 20 percent operating margin, a tax rate of 40 percent, and approximately $75M in capital. Subsequent to a successful exit, EBV believes that Softco could enjoy seven more years of rapid growth. To make the transaction work, EBV believes that the exit value must be at least $400M. How does this compare with the reality-check DCF? How much must the baseline assumptions change to justify this valuation?
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Venture capital and the finance of innovation
ISBN: 978-0470454701
2nd Edition
Authors: Andrew Metrick
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