Applied Finance Venture Capital Worksheet

Your first objective should be to compute the expected return (asset growth and cash-flow trajectory) over the next ten years for the following asset classes of interest. VC .For simplicity you may assume an investment of $100 Million in VC (we will compute optimal allocations later.)

1. Use data as far back as possible. From the beginning.
2. Use monthly data to compute monthly expected return and SD, then annualize them. Report Expected ret, SD in %.
3. List the source of your data (unclear for some asset classes).
4. Find a good index! VITAX, with its large publicly traded constituents, may not be the ideal comp for VC holdings which tend to be smaller, privately- held. So find a large VC index.
5. Assume 100 m in starting allocation in each asset class, then do 10000 simulations, to compute the asset value trajectory over ten years Which are 120 month total. VC Invest holding year would be 5 yrs. which means we split 100m to 4 part- Year 1, 2,3,4, and for each part we invest 25m. For example, year 1 we invest 25m and Expires in the year 6. Year 2 we invest another 25m, and then so on. Standard Features: 2% of fixed assets- 20% of profits over Target Ret>8%,
6. Plot the 1%, 10%, 25%, 50%, 75%, 90%, and 99% percentiles of the asset growth trajectory by the result of 10000 simulations.
7. Using Excel to compute data, make a graph and make a final word report Contains all the points mentioned above.