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 initial equity position must you require for your investment? What must be your initial valuation of the company excluding the amount of your investment? What is the internal rate of return for this investment?

Multiple Choice

15.55%

19.00%

22.22%

11.11%

44.44%

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 final equity position (weight) must you require for your investment?

26.79%

15.55%

22.22%

10.00%

19.00%