1.

A founder of a portfolio company and VCs are negotiating the valuation of portfolio company. In a range of valuation, __________________________________.

Group of answer choices

Founder of portfolio company benefit by negotiating for high end valuation.

VCs benefit by negotiating for high end valuation.

Both parties are indifferent as long as the valuation is correct.

2.

Series A venture capital fund has a target multiple 10X and the exit value is estimated at $500 million with the probability of 20%. Following the venture capital method, what is the valuation of the portfolio company?

Group of answer choices

$40 million

$50 million

$60 million

3.

Venture capital method uses successful exit value as a _____________.

Group of answer choices

Target exit value

Expected exit value

4.

(Common information for the next questions.) EBV is considering a $5M Series A investment in Newco. EBV proposes to structure the investment as 5M shares of convertible preferred stock. The founder and employees of Newco have claims on 10M shares of common stock. Thus, following the Series A investment, Newco will have 10M common shares outstanding and would have 15M shares outstanding on conversion of the CP. EBV estimates a 20 percent probability for a successful exit, with an expected exit time in 5 years and an exit valuation of $400M. The $100M EBV fund has annual fees of 2 percent for each of its 10 years of life and earns 20 percent carried interest on all profits. Assume the following: The cost of venture capital is 15%; GVM =3; expected retention for first round investors is 50%. What is the proposed ownership today at the time of investment?

Group of answer choices

16.65%

33.3%

40.0%