Calderfield — Series D Pre-IPO Crossover at $3.2B
A 7-hour Venture Investment Memo case study with a complete model answer
Modeled After
Spark Capital
The priced-round prompt Spark Capital is reported to set, at late stage: the exit multiple in the what-you-need-to-believe chain is anchored to a named public peer set, and the required growth is presented at several hold periods rather than one.
Structure and exercise format are modeled after Spark Capital — the single-question prompt and the memo it expects. The company, the financials and every figure in this case are entirely our own.
The Situation
Calderfield Logistics Technologies, Inc. sells transportation-management and freight-settlement software to mid-market shippers.
Calderfield Logistics Technologies, Inc.
- Sector
- Enterprise software / supply chain — transportation management and freight settlement for mid-market shippers
- Size
- Geography
- United States, selling to mid-market and enterprise shippers; carriers and brokers transact on the platform but are not the customer
- Ownership
- Situation
The Prompt
You are an investor at a crossover fund that buys the last private round and holds through the listing.
Supporting Materials
What you are handed at the start of the case, in the format a real process would use.
The assignment (material-1.pdf)
Term sheet and round mechanics (material-2.pdf)
Audited accounts and the company plan (material-3.pdf)
Expert call and reference notes (material-4.pdf)
Market and comparable-company extract (data-1.xlsx)
What You Have to Produce
The deliverables, in the order the committee will read them. The exercise runs 420 minutes.
PART 1
The round: settle ownership before anything else
PART 2
Dilution to exit, in the events that actually happen
PART 3
Screen the listed set, and defend the exit multiple
PART 4
What you need to believe
PART 5
Cross-check the revenue multiple on earnings
PART 6
Price the IPO ratchet, and the preference behind it
PART 7
Three operating cases and the path to profitability
PART 8
Sensitize the compression, then solve for the price
How to Approach It
The order a strong candidate works in, and why. This is the shape of the answer — the finished memo is in the solution set below.
- 0:00 – 1:45
read everything, and open nothing
- 1:45 – 2:30
settle the ownership arithmetic
- 2:30 – 3:15
screen, then run the bar backwards
- 3:15 – 4:15
the structure, and the cases
- 4:15 – 7:00
write, and solve for the price
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
At crossover the exit multiple is a fact, not an assumption
In an early-stage underwrite the exit multiple is an assumption nobody can falsify for a decade. At crossover it is a number on a screen: the company will list into a market that is pricing its comparables today. That makes the entry multiple and the exit multiple directly comparable, and it makes the difference between them — the compression — a term in the return rather than a footnote to it. It also means the exit multiple has to be defended with a named, screened peer set rather than assumed.
Compression enters the return linearly, so it can be priced exactly
The payout is ownership multiplied by revenue times the exit multiple plus net cash. The multiple appears once and only once, so one turn of it is worth exactly ownership times revenue divided by capital invested. Compute it and the whole argument stops being rhetorical: you can say what two turns cost, how many turns separate your case from the bar, and what exit multiple would be needed to close the gap. Then compare that multiple against the peer set and see whether any real company trades there.
Ownership is struck on the post-money, always
The stake is the primary divided by the post-money, not by the pre-money. Dividing by the pre-money overstates the stake by exactly the ratio of post-money to pre-money, and it flatters every line downstream — the exit proceeds, the multiple of invested capital, the required growth rate. It is the most common arithmetic error in this archetype and it always errs in the investor's favor, which is why it survives so many drafts.
The offering converts the preference away
A qualified offering converts every preferred series to common. So in the exit everybody in the process is underwriting, the liquidation preference is worth nothing at all: the payout is ownership multiplied by equity value, with no waterfall in it. The preference governs the other exit — a trade sale, which is what happens if the listing window does not open — and it is there, not at the listing, that it decides what the common receives. A register at exit that still carries a preferred class is claiming a protection that has been extinguished.
The ratchet is the protection that survives, and it is a solved quantity
A conversion-price ratchet re-prices the round if the company lists below a stated hurdle. It is circular by construction: the additional shares change the share count, which changes the offering price, which changes the additional shares. Solve it rather than asserting it. Then find its two boundaries — the listing value at which it first issues a share, and the listing value below which the cap binds and the make-whole stops working. A capped ratchet is a partial hedge with the loudest possible name.
Structure versus price is a threshold, not an opinion
A point off the entry price is worth the same amount in every state of the world. A ratchet is worth nothing in the states where the company lists well and a great deal in the states where it does not. Dividing one by the other gives the probability of a bad listing at which the two are worth the same — which converts an argument about negotiating priorities into a number the reader can accept or reject. State it in both directions: above the threshold the protection is worth more than the price concession, and below it the reverse.
A forward revenue multiple hides a margin assumption
Divide the peer median revenue multiple by the peer median earnings multiple and you have recovered the operating margin the revenue multiple assumes. If the company you are underwriting will not be earning that margin at the exit date, applying the peer revenue multiple to it is paying a much higher earnings multiple than the peer set trades at — and the honest cross-check divides by the company's own forecast margin, never by the implied one. Dividing by the implied margin reproduces the revenue multiple exactly, so it is a check that can never disagree with the thing it is checking.
Public investors underwrite growth and profitability together
The Rule of 40 — forward growth plus operating margin — is the statistic a public software investor reaches for first, and it is what decides whether a company lists at the median of its peers or below it. Score it on the same basis as the peers, which means after stock-based compensation: a Rule of 40 struck on adjusted earnings with stock compensation added back is a different and more flattering statistic, and it is not the one the market quotes.
Charge the cost of being public
Audit, listing fees, investor relations, a second finance team, insurance for the board. It is a real and permanent drag on the operating margin, it is a cost no private comparison ever carries, and it lands in exactly the year the exit multiple is struck. Leaving it out is how a pre-IPO margin bridge overstates the earnings the multiple is applied to.
The hold is short, and that is what a crossover round is for
A crossover fund buys the last private round because it wants a short, visible path to liquidity. So a case that only clears the bar on the longest hold in the mandate has not really cleared it — it has bought an early-stage risk profile at a late-stage price. Present every case at every hold and let the reader see which cells work, rather than picking the hold that flatters the answer.
Recommend a price, not a company
'Good company, wrong price' is a complete answer and often the honest one. Hold the exit constant, solve for the pre-money at which your own cases clear the bar, and say how far that sits from the ask. Here the solve is closed form, because the offering converts the preference away and there is no waterfall to re-solve — and noticing that is itself part of understanding what kind of instrument you are buying.
What Makes It Hard
The specific traps in this case — the places candidates lose the assessment without noticing.
Check Your Answer
Type the figures you produced and find out how many are right before you open the worked answer. You get a verdict and, where you are off, a pointer to the part of the build to re-check — never the number itself. Everything you type stays on this device.
How to type a figure. Digits, with an optional unit: 1,234.5, $1,234.5, 2.6x, 21.4%. For a negative use (20.0) or -20.0. Enter as many decimals as you carried — precision is never penalised.
What the Case Asked For
The arithmetic is only half of it. Tick off what you actually produced — this half is yours to score, because nothing can grade a written recommendation from a checkbox.
The Model Answer
The worked answer in full: memo, built the way a banker would actually build it. It is a reference, not a submission — a strong answer under the clock is far shorter.
What the Solution Covers
- —Crossover underwriting against public comparables
- —Path to profitability under public scrutiny
- —Exit multiple anchored to a peer set
- —Net debt and cap structure at exit
- —Ratchets and IPO protections
- —Recommendation at a compressed return
Memo
The written recommendation and how it was reached
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Memo (PDF) — yours to open, edit and rebuild
Walkthrough
A conversational walkthrough of how to approach the case under time pressure — where to start, what to cut, and how the recommendation gets defended.
Audio Walkthrough
How to approach Calderfield — Series D Pre-IPO Crossover at $3.2B
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
Why is there no deck?
Because the format is memo-first. The deliverable is seven to ten portrait pages of argument with the exhibits sitting inside it. An investment committee reading this before a Monday meeting wants the recommendation on page one and the reasoning behind it; a slide deck spends its first four pages saying what a masthead says in four lines.
How is this different from a Series B or Series C underwrite?
Three things, and each of them changes the arithmetic rather than the wording. The exit multiple is a public number you can look up rather than a private one you assume. The exit is an offering, which converts every liquidation preference away and leaves the ratchet as the only protection that survives. And the hold is three to five years rather than seven to ten, so the return has to come from revenue growing into the multiple rather than from a decade of compounding.
Should I build a discounted cash flow?
No. There is no discount rate in this exercise, no free cash flow worth discounting at a company still burning cash, and no terminal value that would not simply restate the exit multiple. Importing a cost-of-capital debate into a crossover round adds a page of apparatus and no information. If you want to test the valuation assumption, grid the exit multiple and the hold — those are the two a partner will actually argue about.
Which multiple should I underwrite the exit at?
Whichever one you can defend from a screened set of listed companies, and say which. Forward revenue is the crossover reader's unit for a company that is not yet meaningfully profitable, but you owe them the earnings cross-check as well — and you owe them the growth-adjusted view, because a headline multiple compared across companies growing at different rates compares nothing.
How should the near year be treated across my cases?
Hold it common. A company eighteen months from a listing has real visibility on the next twelve months — the backlog is signed and the renewal calendar is known — so a case that moves the near year is arguing about something it cannot see, and it makes the entry multiple case-dependent, which it is not. Let the cases diverge from the second forecast year onward.
Is a 1.0x non-participating preference worth anything here?
Not in the exit you are underwriting. A qualified offering converts it away, so at the listing you own common like everyone else. It matters in a trade sale, and it matters most for what it does to the people below you in the stack: below the total preference the common receives nothing at all. Model it there, and be honest that it is not what protects you in the base case.
What if the answer is 'no'?
Then write it, and name the price at which it becomes yes. A recommendation to pass that also says what you would pay is a stronger and more useful answer than a yes manufactured by nudging an assumption. The reviewer's next question is always what you assumed and why, and 'because otherwise the deal did not work' is not an answer that survives it.
Can better terms rescue a price I do not like?
Test it rather than assuming either way. Price the protection in the same unit as the return, price a point off the entry price in the same unit, and compare. Protection is often worth more than a point of price — but a term sheet clause protects the downside and cannot create the upside, so it will not close a gap measured in tens of points of valuation. Say which of those two situations you are in.
How much modeling does this actually need?
Less than you think, and it is a constraint on the prose rather than the graded artifact. The ownership arithmetic, a screened peer table, three revenue-and-margin paths, the ratchet solve and two sensitivity grids will hold up the entire memorandum. A crossover underwrite that needs a fifteen-tab operating model has stopped being an underwrite.
Is this format still used?
Yes, and it is the most transferable of the venture formats because it sits on the seam between private and public investing. A round is priced, the partnership has a return bar and a hold, and somebody has to say in writing what would have to be true for a company to be worth more when it lists than it is worth today. The memorandum is the artifact the investment committee actually reads, and it has to name a price.
About This Venture Investment Memo Case Study
Venture Investment Memo case study for venture & growth interviews. 420-minute format covering crossover underwriting against public comparables, path to profitability under public scrutiny, exit multiple anchored to a peer set. Includes the full prompt, a written memo and an audio walkthrough.
This case study sits in Venture & Growth, under Investment Research Memos. Every case ships with the full prompt, the supporting materials, a complete model answer and an audio walkthrough of the judgment behind the recommendation.
420-Minute Format
The time limit a real assessment would give you
Memo
Included in the model answer
Audio Walkthrough
How to approach the case under time pressure
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