Series B:Assume that EBV invested in Newco at the terms in Exercise 10.2, and it is now one year later. Talltree is considering a $15M Series B investment in Newco. Talltree proposes to structure the investment as 6M shares of convertible preferred stock. The employees of Newco have claims on 12M shares of common stock, and the previous venture investors (EBV) hold 6M shares of Series A convertible preferred. Thus, following the Series B investment, Newco would have 24M shares outstanding on conversion of the CP. Talltree estimates a 30 percent probability for a successful exit, with an expected exit time in 4 years and an exit valuation of $700M. The $250M Talltree fund has annual fees of 2 percent for each of its 10 years of life and earns 20 percent carried interest on all profits. The Talltree fund applies GP% =10% for all investments.

Assumption:

The typical retention by round is:

1st round = 50%, 2nd round = 60%, 3rd round = 67%, 4th round or later = 70%.

LP's expected rate of return is 15%.

What is your investment recommendation for Talltree?

Answer the following questions with supporting works.

For GPs?

For LPs?

Target multiple?

Target return?