The written report should answer the assigned questions for the case. Please include a brief overview, answers to the specific questions (with reference to your exhibits) and a brief summary/conclusion as to what you learned
Please write it in essay format. Answer the questions in order in their own paragraph.
1. What valuations do these assumptions suggest?
2. The founders also wanted to do some sensitivity analysis with their assumptions. They wanted to know how the valuations would change if the second round of financing required $3 million? And what would the valuation be if they raised $6 million up front with no further round thereafter?
3. If Vulture ventures used the above valuation model, and indeed used a 45% discount rate, what implicit valuation after 4 years must they have used?
4. If Vulture ventures used the above valuation model, and believed the IPO value of $80 million, what implicit discount rate must they have used?
5. A friend of Bob, called Wuz, was convinced that the investors were using the assumption in #4 above, but he reasoned as follows: If Vulture Venture wants to pay only $1/share; maybe the founders could simply split the shares (from 5 million to 10 million) and the option pool (from 1.5 million to 3 million). This way everyone would win: the founders would get more shares and the investors would get the stock at a price they want. Based on this reasoning, should Wuz get an honorary MBA?
6. The analysis above assumes that the investors are holding straight equity. Under the term sheet proposed by Vulture Ventures, is this a valid assumption?
Make sure that you answer ALL THE QUESTIONS clearly with good supporting details.
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