Project Lindenmere — Vertical SaaS Minority Investment
A 3-hour Growth Equity Minority Investment case study with a complete model answer
The Situation
Lindenmere Clinical Software, Inc. sells clinical workflow, documentation and revenue cycle software to outpatient behavioral health practices in the United States.
Lindenmere Clinical Software, Inc.
- Sector
- Technology / vertical software — clinical workflow, documentation and revenue cycle software for outpatient behavioral health practices, with an embedded patient-payments product
- Size
- Geography
- United States; headquartered in Providence, Rhode Island
- Ownership
- Situation
The Prompt
You are on the investment team at Ambervale Growth Partners.
Supporting Materials
What you are handed at the start of the case, in the format a real process would use.
Blank model template
XLSXUnlock
What You Have to Produce
The deliverables, in the order the committee will read them. The exercise runs 180 minutes.
PART 1
Cohort retention, derived rather than quoted
PART 2
Unit economics, quoted the way they should be quoted
PART 3
The rule of 40, on one basis
PART 4
The market, built from a count
PART 5
Three forward cases
PART 6
What you would own, and what it pays
PART 7
Governance, liquidity and 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 and Excel model are in the solution set below.
- 01
Read for what you would own before you read for the story (25 minutes)
- 02
Derive retention, then decompose it
- 03
Quote two paybacks and two lifetime values
- 04
Screen the peer set before you use it
- 05
Build the market as a count and the plan as a penetration
- 06
Build the model on your own basis (95 minutes)
- 07
Write the memorandum (60 minutes)
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
Minority position without exit control
A stake too small to compel a sale, a listing or a redemption. The operating analysis may be identical to a buyout's, but the return is not, because the exit date is set by somebody else. The discipline is to price the absence of control — in the security, in the governance package and in the hold period — rather than to note it in a risk section.
Cohort triangle
Revenue or logos by vintage, at each period end. Every retention statistic is derived from it: dollar retention is this period's cohort revenue over last period's, logo retention is the same in counts, and the ratio between them is expansion inside the accounts that stayed. A retention rate that is quoted rather than derived tells you nothing about which of the two terms is moving.
Net dollar retention, and its two terms
Revenue from the starting cohort at the end of a period over its revenue at the start, with departed customers contributing zero. It falls for two completely different reasons — the base spending less, or the base leaving — and the decomposition is the only thing that separates them.
CAC payback, on two bases
Acquisition cost divided by the first year's gross profit, in months. In a business with an embedded payments attach there are two answers: the software line alone, and the software line plus the attach. In a segment where the attach is the difference between a payback nobody underwrites and an ordinary one, quoting the second without the first hides the whole risk.
LTV/CAC, bounded and perpetual
The perpetuity form divides customer gross profit by a discount rate plus churn less expansion, and is hypersensitive when expansion approaches the discount rate. A bounded form stops after a stated horizon. Where the two rank a book differently, the ranking is an artifact of the denominator rather than a fact about the customers.
Magic number
Net new recurring revenue divided by the sales and marketing that bought it. Read it alongside payback and cohort retention: when three independent measurements move the same way you are looking at a fact about the business rather than an artifact of one calculation.
Rule of 40, and the basis problem
Revenue growth plus profit margin. It is basis-blind: a company that charges stock-based compensation and a peer that adds it back are not on the same scale, and the gap can be larger than the distance between them. It is also multiple-blind — to an investor selling on a revenue multiple, a point of growth and a point of margin are not worth the same thing.
Bottom-up TAM for vertical software
A count of the businesses in one industry multiplied by what a fully penetrated account is worth, less the share that will never buy at all. It is not a share of a spending pool, and it is why growth in a vertical decelerates as a matter of arithmetic: the universe fills up from the top, so every incremental customer is smaller and harder to keep than the last.
1x non-participating preferred
The holder takes the greater of its money back and its converted share. Bought at the round price, the conversion threshold is the post-money — so between the total preference and the price paid, the position returns the capital and nothing more. That band is what the security actually is, and it widens as the option pool refreshes.
Participation, and the cap
A participating preferred takes its preference and then shares the residual. A cap stops that at a stated multiple, after which the holder simply converts. A cap set below the base case's own return is therefore worth nothing there and a great deal in a downside — which is what makes it a term the founders can grant.
Protective provisions and the class vote
Vetoes exercised by a majority of the preferred voting as a single class. An investor holding a minority of the preferred shares them rather than holds them, and the list of what they do not reach — the budget, the option refresh, the chief executive, and the decision to stay private — is usually the more important list.
Redemption right
A right to require the company to buy the position back after a stated date at a stated price. It converts an equity position into a fixed-rate instrument, and it is worth only what the company can fund out of its own cash — which makes it a forcing device in a negotiation about a sale rather than a liquidity plan.
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 and Excel model, built the way a banker would actually build them. It is a reference, not a submission — a strong answer under the clock is far shorter.
What the Solution Covers
- —Cohort retention and net dollar retention
- —CAC payback and LTV/CAC
- —Magic number and sales efficiency
- —Rule of 40 trade-off
- —Minority protections and structured preferred
- —Returns without control
Memo
The written recommendation and how it was reached
Upgrade to Diamond
Sign up and upgrade to Diamond to unlock the memo, the Excel model and the audio walkthrough.
Get StartedThe Excel Model
The model is linked and tied out end to end — every schedule, every formula and every check, in the file itself.
Downloads are available to Diamond members
Excel Model and 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 Project Lindenmere — Vertical SaaS Minority Investment
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
Why is there no discounted cash flow in this case?
Because the committee is not being asked what Lindenmere is worth in the abstract. It is being asked whether the firm's own minority bar clears at a stated price. That is a price solve, not a valuation: you fix the required return and the security and solve for the price. A terminal value would be answering a question nobody asked.
Why does the model have no debt schedule?
Because there is no debt. This is a primary equity round: the money goes into the company, no holder is selling, and there is no acquisition financing anywhere in the transaction. That also has a useful consequence — the company receives the same money at any valuation, so the exit equity value is constant in the price and the price ceiling inverts algebraically instead of needing a goal seek.
What does it mean to compute returns through the preference stack?
It means the proceeds to your position are whatever the waterfall pays your class at that exit value, not your ownership percentage multiplied by the equity value. Those two are the same only when your class converts. Below its conversion threshold you receive your preference — and in this case the difference between the two answers is a large fraction of the check.
Why do the cohort analysis by vintage when the segment book is easier?
Because a blended segment figure averages a mature base against a young one, and first-year churn is where the loss sits. The two cuts can disagree — a segment can look like the best in the book on blended retention while the vintage that is mostly that segment retains worst. Only the vintage cut shows the shape.
How much of the three hours should go on the model?
About 25 minutes reading, 95 on the workbook and 60 on the memorandum. The workbook leaves 1,211 cells across 331 authored rows, but only 378 distinct formulas — comfortable if you build one forward case and copy it, and impossible if you rebuild each one from scratch. Do not let the memorandum become a footnote: on this archetype it is where the governance and the liquidity path get priced.
What separates a strong answer from an average one?
Three things: deriving retention and decomposing it rather than quoting the headline; computing every return on your own position through the stack, never on the whole company; and putting price, hold period, operating case and security into one unit so the committee can see which lever is the big one — which, on this transaction, is not the one you control.
What does the podcast cover that the memorandum does not?
How to read the prompt under time pressure, where the marks actually sit, the order to build in, and the four failure modes that sink otherwise competent answers — treating it as a buyout with the debt removed, quoting retention instead of deriving it, comparing two different stock-compensation bases, and assuming the exit.
About This Growth Equity Minority Investment Case Study
Growth Equity Minority Investment case study for venture & growth interviews. 180-minute format covering cohort retention and net dollar retention, cac payback and ltv/cac, magic number and sales efficiency. Includes the full prompt, a written memo, a tied-out Excel model and an audio walkthrough.
This case study sits in Venture & Growth, under Growth Equity. Every case ships with the full prompt, the supporting materials, a complete model answer and an audio walkthrough of the judgment behind the recommendation.
180-Minute Format
The time limit a real assessment would give you
Memo
Included in the model answer
Excel Model
Included in the model answer
Audio Walkthrough
How to approach the case under time pressure
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