You are an early-stage venture capitalist conducting due diligence on a biotech start-up. You are willing to contribute $1,500,000 in the first round of financing, and you target a final exit multiple of 12 invested capital, which estimate will happen in ten years. At that time, you estimate the firm will sell for $80,000,000. You expect an additional round of financing in four years in which you will not participate that will dilute your ownership share by 40%. What must be your initial valuation of the company excluding the amount of your investment?

Multiple Choice

$90,000,000

None of the options are correct.

$2,000,000

$2,500,000

$4,500,000

Question 2

You are an early-stage venture capitalist conducting due diligence on a biotech start-up. You are willing to contribute $2,000,000 in the first round of financing, and you target a final exit multiple of 10 invested capital, which estimate will happen in ten years. At that time, you estimate the firm will sell for $90,000,000. You expect an additional round of financing in four years in which you will not participate that will dilute your ownership share by 50%. What is the expected internal rate of return for this investment?

Multiple Choice

25.89%

26.79%

10.00%

19.00%

18.40%

Question 3

You are an early-stage venture capitalist conducting due diligence on a biotech start-up. You are willing to contribute $1,500,000 in the first round of financing, and you target a final exit multiple of 12 invested capital, which estimate will happen in ten years. At that time, you estimate the firm will sell for $80,000,000. You expect an additional round of financing in four years in which you will not participate that will dilute your ownership share by 40%. What is the expected internal rate of return for this investment?

Multiple Choice

12.00%

28.21%

18.40%

10.00%

34.70%