Briefly discuss the typical VC compensation structure.

Please help with the following questions:

Short Answer

1.Briefly discuss the typical VC compensation structure. What are the components? What are the benefits for the VC? Are GP and LP interests likely aligned through the structure?

2.Briefly outline the central concerns of working capital management and capital budgeting.

Short Essay (0.5-1 page)

1.Discuss the Modigliani-Miller tradeoff and Myers-Majluf pecking order theories of capital structure in depth. What do the respective theories prescribe when it comes to capital structure decision-making? Are they equally viable in the world of small, privately-held businesses versus in the public space?

2.Discuss the logic of real options analysis. Describe at least three distinct real options. Does flexibility increase or decrease the value of real options? Why? What about uncertainty?

3.Discuss the relationship between firm size and firm value. Is there always a direct relationship between the two or is it more complex? Please explain in depth.

(you may expand the following idea: In many cases, firm size (by revenues) and firm value are directly related to each other. There are, however, instances where an increase in firm size could be value destroying—such as when a firm makes large investments in underperforming areas (which generate revenues, but disappointing forwards-looking profitability). Such a firm could actually become more valuable by selling or shutting down its underperforming operations and redirecting internal investment to core opportunities.)

4.Provide an in-depth discussion of six distinct sources of early-stage finance. Be sure to address any complexities, drawbacks, and/or risks associated with all six.