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OutReach Networks First Venture Round

Solution Id Length Case Author Case Publisher
2104 301 Words (2 Pages) Susan Chaplinsky Darden School of Business : UV6569
This solution includes: A Word File A Word File

Venture capital can use several methods to value the company. The most suitable way we can use seeing the information given is EBITDA in this case. Everest Partners expects a rate of return of 40% to 60%. We can use 55% as an average to simplify calculating the value.

Following questions are answered in this case study solution:

  1. Is Everest Partners justified in asking for a 30% share of the equity?

Case Study Questions Answers

To determine the company’s worth, we have taken the sixth year, which is assumed to be the last year for the venture capital with the company. Using the industry average EBITDA multiple provided in the data, we determine the company value is $107 Million. The $30 Million investment by the venture capital constitutes 28.03% of the equity in the company. Moreover, the post-money valuation is $107 Million, which shows that shareholder wealth will increase by this amount after the sixth year when venturing capital exits.

Using the price/earnings method gives us a post-money valuation of $ 170.82 Million with a return on investment of 55%. The venture capital has valued the share price to be $2.14.

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