Square Inc. Financing a Unicorn

1. a) How are venture capital private equity structured? -Who are involved? What are general partners and limited partners? How the capital is collected?

b) How are private equity firms compensated? - What are Management fee andCarried interest? How much are they?

c)Why may Khosla Ventures be motivated to push for Square to seek an exit?

2. What characteristics do the firms in case Exhibit 2 have in common? Do you agree with Marc Andressen's thoughts regarding unicorn valuation levels? Why or why not?

3. What would the capitalization table look like after the series E issuance? What is the post-money valuation?

Utilize Exhibit 1 for capitalization table

Exhibit 5 for key terms of Series E)

Calculate Series A, D, and E post-money valuation

Equation for each post-money valuation

4. What returns would each class of investors realize if Square exited through an IPO rather than through a sale at valuations of $3 billion, $6 billion, or $9 billion? How would the returns change if the series E securities did not have the IPO ratchet?

5. Do you recommend investing in the series E preferred round?