7. A company receives $7 million from New Enterprise Associates (NEA) for a post-money evaluation of...
7. A company receives $7 million from New Enterprise Associates (NEA) for a post-money evaluation of $20 million.
a. What is the Pre-money Valuation and what percentage of the company will be owned by NEA?
b. How can they calculate their ROI?
Homework Answers
a)
Pre-money Valuation = Post Money Valuation-Investment by NEA = 20-7 = $13 Million
Percentage owned by NEA = Investment by NEA/Post Money Valuation = 7/20 = 35%
b)
NEA can calculate their ROI as follows:
Whenever the company is taken over, the Value at which it is taken over, will be considered.
ROI will be = [(New Value*NEA's share)-Investment]/Investment
Say for example, Company is taken over for $30 Million.]
In that case, ROI for NEA will be = [(30*0.35)-7]/7 = (10.5-7)/7 = 50%
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