EBV is considering a $$5$M Series A investment in Newco. EBV proposes to structure the investment as $6$M shares of convertible preferred stock. The employees of Newco have claims on $10$M shares of common stock. Thus, following the Series A investment, Newco will have $10$M common shares outstanding and would have $16$M shares outstanding on the conversion of the CP$.$ EBV estimates a $25\%$ probability for a successful exit, with an expected time in $5$ years and an exit valuation of $$500$M$.$ The $$100$M EBV funds have annual fees of $2\%$ for each of its $10$ years and earns $20\%$ carried interest on all profits. How sensitive is this recommendation to different assumptions about the exit valuation and the probability of success?

ROSS is considering a $$6$M Series A investment in Newco. ROSS proposes to structure the investment as $3$M shares of convertible preferred stock. The founder of Ross who will continue with the firm, currently holds $10$M shares of common stock. Thus, following the Series A investment, Newco will have $10$M common shares outstanding and would have $15$M shares outstanding upon conversion of the CP$.$ ROSS estimates a $25\%$ probability for a successful exit, with an expected exit time in $3$ years. What is your investment recommendation? Show calculations.

What are the steps of the "Standard VC Method"? Explain the rationale for each step