Question: Series B: Assume that EBV invested in Newco at the terms in Exercise 10.2, and it is now one year later. Talltree is considering a $15M Series B investment in Newco. Talltree proposes to structure the investment as 6M shares of convertible preferred stock. The employees of Newco have claims on 12M shares of common stock, and the previous venture investors

questions and answersSeries B: Assume that EBV invested in Newco at the terms in
Exercise 10.2, and it is now one year later. Talltree is
considering a $15M Series B investment in Newco. Talltree proposes
to structure the investment as 6M shares of convertible preferred
stock. The employees of Newco have claims on 12M shares of common
stock, and the previous venture investorsQuestion: Series B: Assume that EBV invested in Newco at the terms in
Exercise 10.2, and it is now one year later. Talltree is
considering a $15M Series B investment in Newco. Talltree proposes
to structure the investment as 6M shares of convertible preferred
stock. The employees of Newco have claims on 12M shares of common
stock, and the previous venture investors.Series B: Assume that EBV invested in Newco at the terms in
Exercise 10.2, and it is now one year later. Talltree is
considering a $15M Series B investment in Newco. Talltree proposes
to structure the investment as 6M shares of convertible preferred
stock. The employees of Newco have claims on 12M shares of common
stock, and the previous venture investors (EBV) hold 6M shares of
Series A convertible preferred. Thus, following the Series B
investment, Newco would have 24M shares outstanding on conversion
of the CP. Talltree estimates a 30 percent probability for a
successful exit, with an expected exit time in 4 years and an exit
valuation of $700M. The $250M Talltree fund has annual fees of 2
percent for each of its 10 years of life and earns 20 percent
carried interest on all profits. The Talltree fund applies GP% =10%
for all investments.
 
Assumption:
The typical retention by round is:
1st round = 50%, 2nd round = 60%, 3rd round = 67%, 4th round or
later = 70%.
LP’s expected rate of return is 15%.
What is your investment recommendation for Talltree?
Answer the following questions with supporting works.
For GPs? 
For LPs?
Target multiple?
Target return?
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