A bias-neutral venture capitalist is contemplating investing $3.5 million in a start-up company. Company net income at end of year four is expected to be $3 million. Given the four year length of his investment, his firm requires a 50% internal rate of return compounded annually. Given that the start-up company’s product line is a novel computer technology, rapid growth is expected and therefore the price to earnings ratio is expected to be 55. Neither future investments nor change in earnings projection is expected prior to the end of the investment term. There are currently 3 million shares outstanding. Using the Sahlman Ownership proportion Formula, compute rounded to the nearest thousandth the percentage of ownership in a start-up company that the venture capitalists should seek.

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