1. According to Berkery the most efficient way of valuing a new venture is to discount future profits back to the present using the company’s cost of debt as the discount rate.
True
False
2. According to Berkery it is not wise for a limited partner to make all of her VC investments in one year. It makes more sense to spread the fund’s investments out over time since the VC market is cyclical and this reduces the chance of hitting the bottom of a cycle.
True
False
3. According to the 424B4 filed by Spotify on April 3rd, 2018, Spotify had gross margins of less than 25%, for the year ended December 31st, 2017.
True
False
4. A venture capitalist may work backwards to value an early stage venture. She starts with the objective of earning 10x on the capital investment. It then becomes necessary to find out how the company will achieve a valuation at IPO consistent with returning 10x to the VC. The factors that must be taken into a account include the size of the market and the ability of the founders to control a significant part of this market while maintaining high gross margins.
True
False