Onset Ventures Free Essay Example, 1250 words

In 1996-97, the size of an average VC fund increased by 40% to $71 billion. The company plans to raise $80m-$95m fund, it’s the largest fund till now. Onset has provided seed financing of $1m for the company TallyUp to develop a viable software product. Onset operates on a model of five business principles and a specific incubation process of pre-seed phase and seed phase to screen the business ideas. The company’s minimum target IRR of a fund is 30% over 12 year cycle. Onset puts in a company around $1m in seed round, $1.5m in the next round, and $2m in the third round. Onset I gave positive IRR within 4 years of its inception (appendix 1) and Onset II took only three years to give positive IRR (appendix 2). The average number of investment has increased in subsequent funds, i.e. $2.5m in Onset I, $3.5m to $4m in Onset II and expected $4.5m to $5m in Onset III. B. Implied Facts Over the last 13 years, Onset has invested mainly in seed-stage and early-stage financing. Onset II has performed better than Onset I (appendix 3). III. We will write a custom essay sample on Onset Ventures or any topic specifically for you Only $17.96 $11.86/pageorder now Problem Definition A. Source Problem How many funds must be raised for Onset III? Whether Onset should invest an additional $1m into TallyUp for development of beta version of the product or TallyUp should seek funding of $3m-$4m for product development and launch from the VC community. B. Secondary Problem How the funds raised for Onset III should be utilized? How the problems faced in either of the decisions of investment in TallyUp are dealing with? IV. Alternative Options The options available to Onset Ventures regarding the fund size and TallyUp investment are: 1. Proceed with the present four partners and decision of investing $5m per partner per year. This will lead to the required funds of $80m, excluding fees and miscellaneous expenses. 2. Anticipating the changing VC industry, the number of partners or sectors can increase, other than the technology sector might evolve with potential start-up funds seeking entrepreneurs. Therefore, additional funds to the already decided funds of $95m can be raised because the limited partners have already made commitments for $140m. 3. Provide $1m to TallyUp to develop beta version of the product. 4. Provide partial funds to TallyUp and assist it to raise remaining funds of the total $4m from other venture capitalists and launch its product in the market. This way Onset could increase its stake in the company and let the other venture firms take 15-20% ownership. V. Criteria 1. Continue the investment focus of the Onset II in Onset III.