How do various terms impact their return

Reference no: EM132014799

Assignment - Entrepreneurial Finance: Evaluating VC Term Sheets

Read the case titled: Evaluating Venture Capital Term Sheets. And Answer critically questions

Questions -

1. Prepare the capitalization table for the MVM term sheet (ref. Appendix I).

2. Critically discuss and compare items the entrepreneurs should focus most carefully on in the two term sheets? (ref. Appendix II).

3. How do various terms impact their return if the company does well? For each term sheet, plot the payoff for the VC and the Company and discuss (ref. Appendix III).

4. How are the venture capital term sheets affected by the outstanding convertible notes?

5. What is missing from these term sheets?

6. If they run into trouble, how can they fare in the event of a down round under each of the offers?

7. How, if at all, should they negotiate these terms?

8. With only a few days before the term sheets expire, what should they do? Plot and discuss the Company payoff for each term sheet (ref. Appendix III).

Note - Need assistance only with questions 3 and 8 which require plotting payoff diagrams for the two VC term sheets presented (3) and for the founder (8).

Attachment:- Assignment Files.rar

Reference no: EM132014799

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Reviews

len2014799

6/11/2018 1:01:29 AM

Topic: Entrepreneurial Finance: Evaluating VC Term Sheets. Detailed Question: I need assistance only with questions 3 and 8 which require plotting payoff diagrams for the two VC term sheets presented (3) and for the founder (8). I can provide other answers I have completed if necessary. I am attaching the case with the two-term sheets and the question sheet. The questions indicated in the screenshot are the one to be done. I am attaching 1. my answers (Case Answers docx) for the other questions. I am also attaching 2. Lecture slides (relevant section pages 13-16 ) and a case example (relevant section: Q3 & 4) that illustrate the payoff model we are supposed to try produce.

len2014799

6/11/2018 1:01:22 AM

Assignment Instructions - Read the case titled: Evaluating Venture Capital Term Sheets. Answer critically questions 1-8 below, referencing the literature where appropriate. Include (cut and paste) any Excel tables within the main Word document if required. Explain your calculations and results. The coursework should not exceed 3000 words excluding references, figures, tables, and appendices.

len2014799

6/11/2018 1:01:15 AM

In particular, In Q3, students must review/evaluate how various terms (e.g. redemption, liquidation preference, conversion) affect the exit valuation of AVP and MVM preferred shares and then draw a payoff diagram for each financial structure. For question 8, students ought to look at the term sheets from the perspective of the payoff to the company (founders, angels and employees), weighing all the factors (incl. option pool). Students are advised to draw one payoff diagram showing the Company payoff for (i) AVP and (ii) MVM as a function of exit (or liquidation) valuation and discuss which one is most beneficial to the company.

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