Getting in Tune: VentureMath

As a venture capital firm considers investing in a jewelry retailer, what sensitivity analyses should be performed to understand the risks and returns?
Jeffrey Harris  | Fall 2009
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Sergeant, Pepper & Co. senior partner John Harrison was intrigued by a newly formed jewelry store chain called Rocks, which aimed to sell gold and platinum jewelry using the cachet of new and old rock 'n' rollers. Rocks CEO George McCartney, who wished to raise $5 million in new equity, had put together a 10-page financial forecast showing net income in year five of $5 million. But Harrison and his colleagues wanted to put the assumptions through various scenarios, such as whether Rocks might need $12 million to reach its profit goal and if a participating preferred security might be a better fit for the investment. In this hypothetical case students perform several sensitivity analyses and calculate how different transaction structures might affect the outcome of the investment.

Case ID: 090310
Supplemental Materials: Solutions Spreadsheets , VentureMath Student Dataset

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