A new Internet company anticipates that it will need $30 million
in venture capital in order to...

Question

A new Internet company anticipates that it will need $30 million 
in venture capital in order to obtain a $1 billion terminal value in seven 
years.

Assuming that this company is a seed-stage company with no prior investors, 
what annualized return are investors anticipating? Next, assume that the founder wants a venture capitalist to invest $30 
million of venture capital in three rounds of $10 million at Time 0, Time 1, and 
Time 2, and with a Time 7 exit value of $1 billion. The founder anticipates 
returns of 85%, 60%, and 40% for rounds 1, 2, and 3, respectively. What 
percentage of ownership is sold during each of the three rounds? What's the 
founder ownership percentage at Time 7? Assuming that the founder has 25,000 shares, how many shares should be 
issued in the first three rounds? 
Present your work as a three-page report, showing all calculations 
and formatted in the APA style.

David · Accepted Answer

There are two main source of venture Financing in USA and those are as follows:- 
1) Venture Capital Firm 
2) Private Angel Investors 
The venture firms helps greatly to the new ventures in the following situation:- 
1) It provides long term share capital to a new company to overcome uncertainty and 
become established one. 
2) Helping the entrepreneurs to start a company by providing initial capital and operating 
amount 
The venture financing helps a start-up in its starting period and leave when it becomes an 
established one with good profit and cash flow. (Thomas H Byers, 2012) 
Venture Capital is a form of risky investment in the project with uncertain cash flows and 
profit. Hence, the risk element is very high here and therefore such type of financing projects 
is sometimes called as Risk projects. They are generally started with an idea to take benefits 
of the new innovation. Therefore, investors anticipate a very high return something around 50 
to 100% .(Thomas H Byers, 2012) 
The short term financing requirements for a venture are as follows:

A new Internet company anticipates that it will need $30 million in venture capital in order to obtain a $1 billion terminal value in seven years. Assuming that this company is a seed-stage company...

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