A fictitious VC firm, EBV, that is considering a series A investment in a start-up company named Newco. The terms specify that EBV invests $5 million for 5M shares into Newco, which currently has 10M shares allotted to employees and founders. Security structure is as follows:
First pay [one] times the Original Purchase Price on each share of Series A Preferred. Thereafter, the Series A Preferred participates with the Common Stock pro rata on an as-converted basis. Each share of Series A Preferred (PCP) will automatically be converted into Common Stock with QPO at $5 per share.

If the exit is $72, how much is the distribution to the VC?

Answer rating: 100% (QA)

To calculate the distribution to the VC firm EBV upon exit we need to consider the terms of the inve... View the full answer