Question
A VC firm, Everest Partners, is considering making an investment to a start-up company, OutReach Networks. OutReach currently, has 1000 shares, and 70% of the
A VC firm, Everest Partners, is considering making an investment to a start-up company, OutReach Networks. OutReach currently, has 1000 shares, and 70% of the shares are held by the founder. As a tech company in early stage, OutReach needs $50 million from VC as first-round financing. The target rate of return that the VC firm requires is 50%, and the expected horizon of investment is 7 years. The projected EBITDA of OutReach at year 7 is $350 million. By examining the public firms in the market, the VC firm finds a comparable firm to OutReach that does business in the same industry. The comparable firm currently has a market capitalization of $2,000 million, $700 million worth of debt outstanding, and EBITDA of $300 million.
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Engineering Economy
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