Abena V. had a great idea for a company. She believed that to bring it to fruition it would cost a total of $20 million. She approached a venture capitalist, Sam T. to invest in her business at a pre-money valuation of $6 million. Sam considered whether he should provide the $20 million at a go or the investment should be done in stages. Sam decided to stage his investments as is usual in the venture capital industry. In the first-round financing, Sam provided $4 million dollars at a pre-money valuation of $6 million. The second-round financing was done in two years after Abena had developed a proof of the concept and tested it with four customers. The investment was $6 million dollars at a pre-money valuation of $24 million. In a years time, with the product widely trading on the market , Abena raised $10 million dollars from Sam at a pre-money valuation of $50 million.

1. Evaluate whether Abena V would have been better off taking the $ 20 million dollars at a go?

2. What about Sam T? Would he have been better off investing at a go?

Quantum Partners, a VC has a portfolio of ventures in which it has invested $1,000. The returns on the portfolio are given in the Table below;

Bad Alive Okay Good Great Total

Invested ($)	200	400	200	100	100	1000
Payout in Year 5	0	1X	5X	10X	20X

1. Calculate the gross return on the VCs portfolio.

2. Calculate the net return on the VCs portfolio.

3. Calculate the compound annual growth rate (CAGR) of this portfolio.

4. What does this portfolio tell you about the business model of venture capital firms?