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You manage a multi - stage VC fund conducting due diligence on an pharmaceutical start - up . The required rate of return is 3
You manage a multistage VC fund conducting due diligence on an pharmaceutical startup The required rate of return is You will participate in an A round initially, a B round in four years, and a C round in seven years. Required: a In the A round, what equity position do you need to justify a $ investment if the preround valuation of the firm is $ b In the B round, an additional $ will be raised from a syndication of VCs including your firm. To maintain your equity position, how much must you contribute to the round of financing? Assume the firm is valued at cost c In the C round, an additional $ will be raised from the same syndication of VCs If you wish to continue to maintain the same equity position, how much will you need to invest in this round? Assume the firm continues to be valued at cost d If the firm is acquired for $ in the th year, is your required rate of return satisfied?
You manage a multistage VC fund conducting due diligence on an pharmaceutical startup The required rate of return is You will
participate in an A round initially, a B round in four years, and a C round in seven years.
Required:
a In the A round, what equity position do you need to justify a $ investment if the preround valuation of the firm is
$
b In the B round, an additional $ will be raised from a syndication of VCs including your firm. To maintain your equity
position, how much must you contribute to the round of financing? Assume the firm is valued at cost
c In the C round, an additional $ will be raised from the same syndication of VCs If you wish to continue to maintain the
same equity position, how much will you need to invest in this round? Assume the firm continues to be valued at cost
d If the firm is acquired for $ in the th year, is your required rate of return satisfied?
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