Assume you are an accredited investor according to SEC Reg D. Congratulations, you are part of… 1 answer below »

Assume you are an accredited investor according to SEC Reg D. Congratulations, you are part of the 1%. Assume you have a net worth of $20 million. Further assume you allocate 4% of your net worth to investments in early stage companies (start-ups). Still further, assume you have enough uncommitted cash in this allocation to invest in at least part of this deal if you choose to. Input • Read the attached pitch for an investment in this real Seattle-based company, Lulabop. (I know – they need to requisition a new name.) o Raising: $1.2 Million o Pre-money Value: $3.5 Million o Vehicle: Series a Preferred Equity • (optional) Mr. Porter provided us with an Excel sheet for the Kaufman valuation model which he is going to demonstrate in class. You are not required to use this model in your submission since we haven’t covered it in class. But if you do, please do independent research on the application of this model. Mr. Porter will go over its usage in class. Output Write a memo addressed to Mr. Charles Porter addressing the following: 1. Identify the factors that would argue in favor of your investment. 2. Identify the factors that would argue against your investment. 3. What is your estimate of the real pre-money value of the company? For this part, you can choose to use any valuation method(s) we studied in class as you deem appropriate. You are encouraged to do independent research, for example, identifying comparable companies as Lulabop and retrieving their price multiples. You can also use the Kaufman valuation model, as long as you research on its proper application. 4. Taking these factors into account, how much would you invest in Lulabop? What percentage of the company would you own? 5. You may use any resources at your disposal EXCEPT, you may not contact the company or any of its executives or employees. Also, research and answer the following: 1. What does it mean to be an SEC accredited investor? 2. What does it mean to qualify for 1244 treatment of your investment? 3. What does it mean to qualify for 1202 treatment of your investment? Your writing should have 3-page maximum, with double space. You can attach tables and figures at the end of your writing beyond the 3-page limit

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