III. VCVALUATION

A$.$ VC VALUATION

Once you have the pro forma statements and exit valuation of the target, you also need to use VC valuation techniques to come up with your evaluation of the proposed investment. Following are the information from the term sheet.

All existing shares or VC investment instruments are assumed to be common shares.

You are considering an investment proposal from the target firm to invest KRW$40,000,000,000.$

$40\%$ of your investment will be in redeemable preferred shares and $60\%$ of your investment will be in convertible preferred shares. If you convert all of your convertible preferred shares, you will have $20\%$ ownership in total today.

Further assume the following.

Assume GVM of $2\mathrm{.}5.$

Assume VC discount rate of $15\%.$

Remember, your ownership at the point of exit may not be $20\%.$ If your target requires future refinancing, your ownership will be diluted. Make appropriate assumptions on future financing and dilute your ownership accordingly. Provide detailed explanation why you think such future financing is needed.

B$.$ Make recommendation to investment committee

The final step in the project is to make recommendation to the investment committee whether your VC must proceed with the investment and close the deal or withdraw from the deal.

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