Technology Ventures: From Idea to Enterprise 4th Edition by Thomas Byers,Richard Dorf ,Andrew Nelson

Exercise 2

Glenn Owens' attractive technology start-up requires $10 million to launch. Projections show earnings of $10 million and sales of $80 million in the fifth year. The venture capital firm expects a return of 50 percent per year for the five-year period prior to an IPO. What valuation would you assign to the new venture? What ownership portion should the venture capitalist expect to receive? Perform a sensitivity analysis on the valuation and rate of return.