Assignment Overview
Assignment Task
The objective of this assessment is to put your knowledge into practice, specifically through the task of preparing a funding proposal and recommendation on a new investment opportunity currently considered by a venture capital fund.
Learning Outcomes
At the completion of this assignment, you expected to acquire and demonstrate:
• the relevant technical skills in making quantitative and qualitative assessments of a private company at the early stage of its development cycle
• strong understandings of the relevant theories, institutional framework and practical issues related to venture capital investment, and how they apply to your analyses
• the ability to collect and compile important financial information as well as to produce and present a detailed and convincing investment proposal report
• the ability to work cooperatively in a group
Scenario
Your task is to act as an analyst team working in a venture capital fund. You are tasked to provide an analysis and recommendations on a new investment proposal pre-screened by the partners.
You can choose ONE among FOUR firms (pre-selected by your lecturer as this year’s assignment materials) as the target firm in your analysis. These firms are scheduled to list on the stock exchange soon. They range from early-stage firms to expansion stage firms that are not yet making a net profit.
Information on each of the firms is provided to you Moodle, mainly in the form of disclosure documents (filings/prospectuses) made by the firm to the regulator. Should you require more information to complete the assignment, it will be up to you to gather it.
Brief Summary of Assessment Requirements
Assessment purpose: Prepare a funding proposal and recommendation for a new investment opportunity being considered by a venture capital fund. You act as an analyst team producing a convincing, evidence-based investment proposal for one pre-selected firm.
Core deliverables / key pointers to cover
- Executive summary: concise recommendation (fund / do not fund), investment amount, ownership/terms proposed, and rationale.
- Background & firm selection: company overview, stage (early / expansion), business model, management team.
- Market & industry analysis: addressable market, competitors, growth drivers, regulatory environment.
- Quantitative financial analysis: historical financials (if available), projections, unit economics, cash-flow model, break-even.
- Valuation: apply relevant methods (e.g., DCF, comparable multiples, VC/exit multiple scenarios).
- Risk assessment & mitigation: key risks (market, execution, regulatory, liquidity) and proposed mitigations.
- Deal structuring & terms: proposed funding tranches, equity stake, governance rights, investor protections.
- Exit strategy: likely exit routes and timing (IPO, trade sale, secondary) and expected returns (IRR / multiple).
- Recommendation & implementation plan: clear ask, milestones, use of funds, monitoring KPIs.
- Appendices & evidence: supporting calculations, due diligence documents, prospectus excerpts, assumptions.
How the Assessment was Approached: Academic Mentor’s Step-by-Step Guidance
Below is a concise walkthrough of how an Academic mentor guided the student team through the evaluation, section by section.
1. Kick-off & Scoping
Mentor action: Clarified the assignment objectives, learning outcomes, and selected one of the four pre-screened firms.
Student task: Confirmed scope, timeline, and team roles.
Why: Ensures alignment with the brief and avoids scope creep.
2. Terms of Reference and Plan
Mentor action: Helped the team draft a short ToR covering objectives, key questions, data sources (Moodle prospectuses, filings), and methods (financial modelling, market analysis, benchmarking).
Student task: Produce a project plan with milestones (data collection, model build, draft report, presentation).
Why: A focused ToR keeps the analysis relevant to the venture capital decision.
3. Data Gathering and Desk Research
Mentor action: Taught efficient techniques to extract required information from disclosure documents and to identify gaps requiring external research. Suggested prioritising prospectus financials, management bios, and market metrics.
Student task: Compile historical financials, product/service descriptions, contracts, and market data.
Why: Quality inputs are critical for reliable projections and valuation.
4. Qualitative Assessment (business & management)
Mentor action: Guided the team to evaluate business model robustness, competitive advantages, scalability, and management capability. Provided a checklist for interviewing (if allowed) or analysing management disclosures.
Student task: Complete SWOT analysis and assess team fit for scale.
Why: VC decisions depend heavily on team and business defensibility, not just numbers.
5. Quantitative Financial Modelling
Mentor action: Walked students through building a simple but rigorous financial model: revenue drivers, cost structure, working capital assumptions, capex, and cash flows. Emphasised transparency of assumptions and scenario testing (base / best / worst).
Student task: Create projections (typically 3–5 years), calculate cash needs and funding tranches.
Why: Predicts runway and capital requirements; forms basis for valuation and deal sizing.
6. Valuation & Return Analysis
Mentor action: Demonstrated appropriate valuation approaches for early/expansion stage firms: DCF with scenario ranges, comparable company multiples, and VC exit multiple method. Emphasised sensitivity analysis and clear documentation of inputs.
Student task: Produce valuation ranges and estimated investor returns (IRR / multiple) under different exit scenarios.
Why: Provides evidence for proposed ownership stake and expected returns.
7. Risk Analysis and Mitigation
Mentor action: Helped map key risks into categories (market, operational, regulatory, liquidity) and develop mitigation strategies (milestones, covenants, staged funding, KPIs).
Student task: Recommend contractual or operational protections sensible for VCs (e.g., milestones, board seats).
Why: Demonstrates practical thinking about protecting investor capital.
8. Deal Structuring and Exit Planning
Mentor action: Coached on drafting a clear funding proposal: amount, use of funds, tranche triggers, governance rights, and exit expectations. Reviewed common VC term elements.
Student task: Finalise the proposed term sheet summary and exit timeline.
Why: Converts analysis into actionable investment terms.
9. Report Drafting & Presentation
Mentor action: Reviewed draft report for clarity, logic, and evidence linkage; suggested tightening the executive summary and ensuring all claims are supported by appendices. Coached presentation delivery (clear recommendation, defendable assumptions).
Student task: Prepare final consultancy-style report (concise, with appendices) and a short pitch deck.
Why: Communication quality often determines persuasive power in investment committees.