Individual Report: Instructions
个人报告代写 This individual report consists of two sections with three documents. Section 1 is about total valuation of your target company.
Table of Contents
Arrangement and Requirement……………………………………………………………………………….. 1
Section 1: Total Valuation (One Document Required, 85 Points)………………………………….. 2
Section 2: Partial Valuation (Two Documents Required, 15 Points)………………………………. 2
Section (2.A): First Offer Term Sheet……………………………………………………………………………….. 3
Section (2.B): Internal Investment Memo ………………………………………………………………………….. 4
Bonus Points (5 Points, Optional)……………………………………………………………………………… 6
Arrangement and Requirement 个人报告代写
This individual report consists of two sections with three documents.
Section 1 is about total valuation of your target company.
This section is worth 85 points in this assignment.
Your analysis in this section determines the size of the pie (i.e., the value of firm).
The results will be delivered in a document in the same format as the second team project.
Section 2 is about partial valuation of your target company.
This section is worth 15 points in this assignment.
Your analysis in this section determines how the pie is divided among various stake holders.
Your results will be delivered in the following two documents:
(i) a first offer term sheet sent to the founders;
(ii) an internal investment memo issued from your (fictional) deal team to the senior partners of your VC firm.
The first document will be used to kick off the negotiation process with the founders, and the second document is designed to demonstrate your partial valuation analysis implied by the term
sheet.
In section 2, you only need to complete the clauses in the term sheet that are relevant for valuation purposes.
Nevertheless, up to 5 bonus points can be earned if you finish the rest of the term sheet.
Section 1: Total Valuation (One Document Required, 85 Points) 个人报告代写
This section is essentially the same as the second team project about unicorn valuations.
Elaborate explanations can be found in the instruction document for that project.
Section 2: Partial Valuation (Two Documents Required, 15 Points)
Imagine you have just become a partner of “[Insert Your Family Name Here] Ventures.”
You have found a target company and finished your total valuation analysis in section 1.
Based on the company’s total valuation, you will make a decision on how much to invest and what types of securities to use in the deal.
To achieve this goal, you need to perform a partial valuation analysis in this section.
Your results will be delivered in the following two documents:
(i) a first offer term sheet sent to the founders;
(ii) an internal investment memo issued from your (fictional) deal team to the senior partners of your VC firm.
Section (2.A): First Offer Term Sheet 个人报告代写
- A First Offer Term Sheet
A first offer term sheet will be sent to the founders to kick off the negotiation process.
This term sheet should be favorable toward your VC firm, but should not be too VC-friendly such that your target company walks away from the negotiation table.
In the first offer term sheet, you need to specify how much to invest and what types of securities to use in the deal.
- Types of Securities
Your investment should be for newly issued preferred stock. You must determine the number of shares you want to request from the company and the characteristics of these shares.
In practice, the top three most commonly used securities are: Convertible Preferred (CP), Participating Convertible Preferred (PCP), and Participating Convertible Preferred with Cap
(PCPC).
Pick Convertible Preferred (CP) if the last digit of your Student ID is 0, 1, 2 or 3.
Pick Participating Convertible Preferred (PCP) if the last digit of your Student ID is 4, 5 or 6.
Pick Participating Convertible Preferred with Cap (PCPC) if the last digit of your Student ID
is 7, 8, or 9.
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Clauses Relevant for Valuation 个人报告代写
In order to simplify your analysis, you do not have to formulate the entire term sheet.
Instead, you only need to include the clauses in the term sheet that are relevant for valuation purposes. To be more specific, these clauses are contained in the following sections of the NVCA
term sheet template:
(i) the section “Offering Terms” in the term sheet template;
(ii) the sections in “Charter” that are relevant for your partial valuation.1
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Capitalization Table
Obtaining the information of the company’s capitalization table can take some time and effort.
Hence, let’s make some assumptions to simplify your analysis.
To begin with, assume no one invests in this company before, so you are a series-A investor in this deal.
The founder has 7 million shares of common stock before your investment is made.
In addition, there are 3 million shares of common stock in the employee stock pool.
1 million shares in the employee stock pool have been issued and 2 million shares have not been issued yet.
Section (2.B): Internal Investment Memo 个人报告代写
As the leader of your (fictional) deal team, you will prepare an internal investment memo to demonstrate your partial valuation analysis to the senior partners of your VC firm “[Insert Your
Family Name Here] Ventures.”
This internal investment memo will delineate: (i) LP cost of the deal; (ii) exit diagram; (iii) LP valuation of the company.
1 That is to say, this should be one alternative in the “Liquidation Preference” section, plus either the “Optional Conversion” or the “Mandatory Conversion” section. 5
Since “[Insert Your Family Name Here] Ventures” is fictional, we need to make the following assumptions to enable your partial valuation analysis.
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Characteristics of Your VC Firm
You can assume committed capital = 100M, life of the fund = 10 years, management fee = 2%, carry% = 20%, carry basis = committed capital, and GVM = 2.5.
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Inputs for Option Pricing 个人报告代写
You can assume the volatility of underlying asset = 90%, the risk-free rate = 5%, and the expected holding period = 5 years.
Based on these assumptions, you can draw the exit diagram and figure out the LP cost and valuation. You can use the online tool to facilitate your analysis. 2
Nevertheless, you need to decompose VC’s payoff from the preferred stock into a portfolio of options. 3 Make sure you write down this expression under your exit diagram.
To ensure this is a favorable deal for your VC, the implied LP value from this term sheet should exceed LP cost.
However, remember it should not be too VC-friendly such that your target company walks away from the negotiation table.
Explain how you strike the balance to resolve this tradeoff.
2 For instance, the VCV tools of Andrew Metrick and Ayako Yasuda can be accessed here:
http://vcvtools.com/auto.php
3 This would be something like C(0) – C(12) + 1/3 * C(36).6
In addition, articulate your potential strategies to sweeten the deal to persuade the founder to accept your deal. 4
Bonus Points (5 Points, Optional) 个人报告代写
To reduce your workload, we do not require that you finish the entire term sheet.
Nonetheless, up to 5 bonus points will be rewarded if you finish the other parts (e.g., anti-dilution provisions) of the NVCA template and submit one entire term sheet.
4 Note you need to ensure LP value > LP cost while sweetening the deal. In order to be numerically precise, you probably need to conduct the break-even analysis.
