GO Corp's Financing Rounds and Valuation: A VC and Investment Banking Case Study - Prof. O, Study Guides, Projects, Research of Finance

Download GO Corp's Financing Rounds and Valuation: A VC and Investment Banking Case Study - Prof. O and more Study Guides, Projects, Research Finance in PDF only on Docsity! FIN 4234 Venture Capital and Investment Banking Fall 2008 GO Corporation 1. What was Kleiner Perkins’ investment strategy considering other companies they invested in following GO Corporation? (Check footnote 4) What are the advantages and disadvantages of this approach? Discuss briefly. Advantages: 1) Synergies among portfolio companies 2) Diversification for the VC within a sector 3) Valuable expertise for the GPs in that sector Disadvantages: 1) Lack of diversification across sectors 2) Potential conflicts of interest: i) Do the GPs support all of the portfolio companies equally? ii) May they push a portfolio company at the expense of another? 2. Calculate the pre and post-money valuation of GO Corp implied by each financing round shown in Exhibit 4. Calculate the percentage ownership given to outside investors in each round. Rank investors according to their % stake in the company as of the end of the State Farm round. Investment # of common stock issued outstanding Post-money Stake at Investors (in millions) Price (in millions) (in millions) (in millions) Stake the end Kaplan 1.88 16.7% 7.1% Mgmt/employees 5.62 7.50 50.0% 21.1% First round - A $1.5 $0.40 3.75 11.25 $4.5 33.3% 14.1% First round - B $0.5 $0.60 0.83 12.08 $7.25 6.9% 3.1% Second round $6.3 $0.75 8.40 20.48 $15.4 41.0% 31.6% State Farm round $15.3 $2.50 6.12 26.60 $66.5 23.0% 23.0% sum 100.0% 3. Assume that GO Corp. is projected to go public at the end of 1996. Calculate the exit value of GO Corp. using the method of comparables. Notes: i) Assume that GO Corp does not have any debt in its capital structure at the time of the IPO and any time prior to that. ii) Given the information on comparable companies, you should use two different multiples, which will give you two different valuations. iii) Assume that the valuations of the comparables provided in Exhibit 4 can be used to estimate the exit value of Go Corp in 1996. iv) Take the simple mean of each multiple across several comparables to find the average multiple that applies to Go Corp.