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One of your exciting investments, RockIt, has just completed product development of its new mobile app for weight-loss. The products goal is to help people lose maximum weight within 3 months (maybe not very healthy, but theres a market for this!) and so far, based on the Beta users, the outcomes after 3 months looks good. The entire team is ecstatic.

RockIt has raised $30MM to date by top VCs, you being one of them. Given your rich resources, strong reputation as a skilled and entrepreneur-friendly investor with a high standard of ethics (this is most important for long-term success), and network, you have evolved as the investor of choice out of all the 3 VCs invested. All the VCs own an equal position in RockIt. That said, of the 3 VCs invested in RockIt, your fund is the only one with dry-powder, or cash to continue to meaningfully invest in RockIt. You got your partners excited about RockIt and you think you can get an additional $10MM invested in RockIt from your fund. In total, the VCs own 20% of RockIt. The last round, the $5MM Series Ds post-money valuation was $40MM.

While the products finally done, its 4 months behind plan. Plus, the CEO told you that wouldnt need to raise more cash after the Series D round but thats not the case now. Its unclear if that was due to the product delays or mistakes in the financial modeling from the Controller (there is no CFO). The CEO has a strong track record but not with development stage companieshes a strong sales-y CEO, so good for companies when theyre at the execution stage.

At the end, there is just that much less cash on the balance sheet than was plannedthis is disappointing. The current cash runway is now about 6 months, to Oct 31, 2021. That said, the good news is that RockIts product is ready for launch tomorrow so user data will come in immediately.

The dilemma is that the products success is based on not only immediate usage but the important output data in 3 months after launch to prove that the product works. So, while people may start using the app from tomorrows launch, you do not know if the product is strong enough to make it sticky for people to return. In other words, will people have lost enough weight in 3 months to keep bringing new users to use this app? This data at 3 months is important for long term success.

The tech sector remains hot but there have been rumors about the bubble bursting any day. So everyone wondering what they should do about the next raise. So there are a few questions: Should they squeeze in a financing round now or wait until the outcomes data comes in in 3 months? Should it be tranched investment? Should there be milestones? How much capital should we raise? Should there be other changes required? There are many questions.

RockIts CEO says it needs $10MM more to get to breakeven at May 2022. But you think that breakeven horizon may be longer, and therefore you think $15MM will probably be enough get there. But if there is any hiccup, you think that $25MM will be sufficient, though it will reduce your IRR to the point that it may be below what your fund needs to successfully raise the next fund.

If they raise the money now, you are thinking that the premoney valuation will be only $60MM whereas if you can wait to get the 3 month follow-up outcomes data (and the outcome results are good), then the premoney valuation would double, jumping to $120MM. Currently, based on the financial projections for period ending Dec 2023, RockIt will generate $30MM in sales for YE2023. With comparable revenue multiples of 10x.

With all this, you dont want to have your back against the wall to raise money if the 3 month follow up data is bad or neutral. So, you begin thinking about how to capitalize RockIt now and/or later.

1. What are the financing options and their possible timing? (2.5 points)
2. Detail the security or securities youd recommend (2.5 points)
4. What do you think is the best amount to raise? (2.5 points)
5. When should the money be invested? (2.5 points
6. Write the logic behind choosing your i) and ii) recommendations (10 points)
8. What is the post money valuation if you invested $15MM now? (5 points)
9. What is the post money valuation if you invested $15MM in 3 months? (5 points)
10. What is the expected valuation of the company at Dec 2023? (5 points)
11. What is the expected IRR of your investment if you hypothetically invested $15MM in Dec 2021 with an exit in Dec 2023? (5 points)
12. List the top 6 most important terms with their specifics (eg: board seats = x seats) and reasons why you chose them (ex: board seats yz reasons) for your term sheet, in order of importance (15 points)
13. Would you make the investment and why be specific? (5 points)