1) Entrepreneur looks for $4 million from venture capitalist. They agree that entrepreneur’s venture is presently worth= $12 million and that, when company goes public in the IPO 3 years thus, it will have the expected market capitalization of= $70 million. Given company’s stage of development, VC needs a 40% return on investment. What fraction of firm will VC get in exchange for its $4 million investment?
2) Mini Case- Entrepreneurial Finance and Venture Capital
Through your financial services firm, Vestin Capital, Inc., you have increased a pool of money from clients. You propose to invest it in new business opportunities. To arrange for this endeavour, you make a decision to reply the following questions.
i) Write down some of the challenges of financing entrepreneurial growth companies (EGCS)?
ii) What are the various kinds of venture capital funds?
iii) What are some options for organizing a venture firm?
iv) In what ways must a venture capital firm structure its investments?
v) Must venture capital firms use convertible securities?
vi) Write down some of the exit strategies which may be available to venture capital firm?