# Private Equity

I seriously have trouble studying for AI section, especially this private equity part. Was there ever a case where they tested venture capital valuation? This thing is just insane with so many steps to memorize especially when I can’t really make senses out of each step. The worse is there’s second round and all this bs. Was there ever a case where they tested this?!

PE is new for this year no? vik2000 Wrote: ------------------------------------------------------- > I seriously have trouble studying for AI section, > especially this private equity part. Was there > ever a case where they tested venture capital > valuation? This thing is just insane with so many > steps to memorize especially when I can’t really > make senses out of each step. The worse is there’s > second round and all this bs. Was there ever a > case where they tested this?!

It was new last year. Honestly it’s really simple but you may be out of time now. If you haven’t tried Schweser yet try it there they make it very simple.

the VC valuation is simply taking a PV of the exit value and calling that “POST” then calculate the PRE = POST less INVESTMENTs (your capital call/drawdown) % ownership of the LP (or fund) = INV / POST (say 30%) if GP wants 1M shares you know that represents 70% (100%-30%) of TOTAL SHARES. now calculate X (or LP’s # of shares). Total shares = X + 1M it’s really simple… just think of it as a time value \$ problem… for multiple investment periods, just take the PV of exit value to your most recent INV period… (say 2 investments one at T=0, one at T=5, Exit at T=7) Exit value at T = 7 (say 30M) Discount that 2 years to T=5. Say that is 25M POST2 = 25 at T=5 LP invested say 5M, so PRE2= 25 - 5 = 20M Now treat the PRE2 as your POST1… (you follow soo far?) Then discount PRE2 back 5 years to get your POST1, say that’s now 25 / (1+40% discount rate)^5 = … i dunno, 10M etc etc… (forgive my organization, i’m typing as im thinking this through)