Thornbeck — Series B at $450M
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, answered as a memo with an illustrative deal set-up on the left — pre-money, primary, implied ownership, post-money, then the bridge to enterprise value and the ARR multiple — and the what-you-need-to-believe chain on the right.
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
Thornbeck Security, Inc. sells an identity threat detection and response platform.
Thornbeck Security, Inc.
- Sector
- Enterprise software / cybersecurity — identity threat detection and response, sold to security operations teams
- Size
- Geography
- United States and Western Europe, sold to enterprise and upper mid-market accounts through a direct sales force of 22 quota-carrying representatives
- Ownership
- Situation
The Prompt
You are an investor at a venture and growth fund.
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)
Company deck extract (material-3.pdf)
Reference call 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
Defend the ARR multiple against growth-adjusted peers
PART 3
Dilution to exit, modeled rather than assumed
PART 4
The preference, and what it is actually worth this early
PART 5
What you need to believe
PART 6
Interrogate the retention and the sales efficiency
PART 7
Build the market from the bottom up
PART 8
Three cases, a price, and what would make you wrong
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
run the bar backwards, then check what it assumes
- 3:15 – 4:30
take the operating data apart
- 4:30 – 7:00
write, solve for the price, and write the falsifiers
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
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 money, 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 option pool is part of the price
A pool refresh created pre-money is funded entirely by the existing holders. The headline pre-money is not what they receive; the price per share the round actually strikes is lower, and the difference is the pool. A headline pre-money that does not name the pool is not a price, and a founder who has not worked this out is about to be surprised at signing.
A growth-adjusted multiple is an extrapolation, not a comparison
Dividing a revenue multiple by a growth rate assumes the relationship between the two is a straight line through the origin. That is a reasonable local approximation inside the range where you have observations, and it is not a comparison at all outside it. When the subject grows several times faster than the fastest company in the set, off a revenue base two orders of magnitude smaller, the per-point figure is being evaluated somewhere the set has nothing to say about. A listed peer set is a legitimate anchor for the EXIT multiple, where the company would be comparable in size and growth. It is much weaker evidence about what to pay today.
Dilution has two halves and one of them is invisible
Future priced rounds dilute you by the new investor's stake and again by the pool top-up each of those rounds requires. Modeling the first and assuming the second away is how a stake that looks like it survives to exit does not. At Series B there are usually three such rounds ahead of you rather than one, and compounding them properly is the difference between a stake you can underwrite and a stake you have assumed.
A non-participating preference has no closed form
Each series takes the greater of its preference and its as-converted share of whatever is left once the series that stay on preference have been paid. That interaction is circular: a later round sitting on its preference shrinks the residual an earlier round converts into, which pushes the earlier round's conversion point up. Solve it at each exit value rather than assuming a rule, and check the answer against the naive preference-over-ownership version to see how far off the shortcut is.
At Series B the preference is worth less than it looks
Almost all of the liquidation stack that will sit ahead of a Series B at exit is money the company has not raised yet. Below the total stack, a pari passu structure shares pro rata by invested amount, so a bad outcome returns cents rather than the money. Above the stack and below the conversion point, every outcome pays about par. The instrument is a floor at par with a wide flat region, which is why a mandate's tolerance for uncapped upside does real work rather than sitting there as decoration.
Check the assumption behind the chain, not just its arithmetic
Running the hurdle backwards divides the required stake value by the ownership at exit. That step is only arithmetic if every series converts at that exit value. A round converts somewhere above its own post-money, so at a late stage the assumption is safe and nobody thinks about it — and at Series B the required exits can sit close enough to the later rounds' post-moneys that it fails. Re-solve the waterfall at each rung and say that you did.
Dollar retention and logo retention are weighted differently
Net and gross dollar retention are weighted by revenue; logo churn is weighted by customer count. A company whose churn is concentrated in small accounts can carry a respectable dollar retention number and a logo churn number that would frighten you, and both are true. Print them side by side. The difference between them tells you where the product fits and where it does not, which is a more useful fact than either number alone.
Landed growth is bought with capacity, so the plan is a hiring plan
Expansion compounds off a base that is already there. Landed revenue has to be re-bought every year, and it is bought with ramped sales capacity multiplied by quota and attainment. Derive attainment from what actually landed, hold it, and restate next year's landing plan in ramped-rep-years. What comes back is a recruiting requirement with a ramp period attached, and it is checkable against what the company has ever managed.
What you need to believe, not what it is worth
A venture underwrite that produces a valuation has answered a question nobody asked. Running the hurdle backwards produces a growth rate instead — a falsifiable claim about the operating business that the research can attack or defend. It also makes disagreement productive: two investors who disagree about a valuation are stuck, while two who disagree about whether a company can compound at a stated rate for five years have something specific to talk about.
A revenue multiple hides a margin assumption
Any exit struck on revenue is an exit struck on earnings with the terminal margin buried inside it. Divide the peer median revenue multiple by the peer median earnings multiple and you have recovered the margin the revenue multiple assumes. Anyone valuing on revenue alone has taken a position on terminal margin without saying so, and the honest move is to state the basis once and hold it everywhere — including on the side of the comparison you did not choose.
Write down what would make you wrong
A recommendation to invest that lists only what has to go right is a pitch. The other half is a small set of observations that would falsify it, specific enough to be checked on a date — a retention figure below a stated level on the next two cohort cubes, a capacity number below a stated level in a year. Written before the money goes out, they let the position be marked against something other than the story that bought it.
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
- —ARR multiple against growth-adjusted peers
- —Net dollar retention diligence
- —Sales efficiency at the scaling inflection
- —Competitive displacement analysis
- —What-you-need-to-believe returns math
- —Diligence plan and reference design
Memo
The written recommendation and how it was reached
Upgrade to Diamond
Sign up and upgrade to Diamond to unlock the memo and the audio walkthrough.
Get StartedDownloads are available to Diamond members
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 Thornbeck — Series B at $450M
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, and the exhibits sit inside it rather than replacing it. A venture partner reading this on a Sunday 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 a Series B underwrite different from a later-stage one?
Three ways, and all three change the arithmetic. There are more financing rounds between you and any exit, so dilution compounds harder and the pool refreshes matter more. The liquidation stack that will sit ahead of you is mostly money that has not been raised, so the preference is worth much less than its face suggests and it binds at exit values the underwrite actually contemplates. And the operating data is finally rich enough to argue with — retention by cohort, sales efficiency, capacity — which means the memo is graded on whether you argued with it rather than on whether you quoted it.
Should I build a discounted cash flow?
No. There is no discount rate in this exercise, no free cash flow to discount and no terminal value that would not simply restate the exit multiple. Importing a cost-of-capital debate into a venture round adds a page of apparatus and no information. If you want to test the valuation assumption, grid the exit multiple and the terminal margin instead — those are the two a partner will actually argue about.
Is a growth-adjusted multiple a legitimate way to price a round?
It is a legitimate way to compare companies that sit inside the same range of growth rates, and it is close to useless outside that range. Compute it, because the other side of the table will, and then say what it assumes and where it is being evaluated. The strongest version of the answer neither ignores the comparison nor leans on it: it uses the peer set where the peer set is evidence, which is at the exit rather than at the entry.
Why run the hurdle backwards instead of forecasting forwards?
Because a forecast is an opinion and a requirement is a fact. Running the bar backwards produces a specific growth rate the company has to deliver, which anyone can then check against the market, the competition and the company's own history. It also protects you from the most common failure in this format, which is building a five-year model that arrives, by coincidence, at exactly the number the fund needs.
The blended retention number looks fine. Why take it apart?
Because a blend is an average of things that behave differently, and the underwriting question is about the behavior rather than the average. Split it by cohort and put logo churn next to dollar retention. If the durable cohort is carrying the blended figure and the growth is landing in the fragile one, the compounding the price assumes is not the compounding the company has demonstrated — and that is a sentence you can only write after you have done the arithmetic.
What is the sales capacity analysis actually testing?
Whether the plan is a forecast or a wish. Landed ARR is ramped capacity multiplied by quota multiplied by attainment; two of those three are observable and the third falls out of what landed. Restating next year's landing plan in ramped-rep-years converts a revenue line into a number of people who must already have been hired, given the ramp. It is the cheapest reality check in the whole exercise and almost nobody does it.
How should reference calls appear in the memo?
Attributed by role and company, never by name, and quoted at enough length that the reader can judge the source rather than your paraphrase of it. Quote the strongest version of the argument you disagree with — a mixed evidence board is more credible than a stacked one, and leaving in the call that cuts against your recommendation is the cheapest credibility you will ever buy.
What if the answer is 'yes'?
Then say so, name the price above which it becomes no, and write down what would falsify it. A recommendation to invest is not softer than a recommendation to pass; it is harder, because it has to survive the reader asking what you would need to see to change your mind. If you cannot answer that in specific, dated, checkable terms, you have a preference rather than an underwrite.
Is this format still used?
Yes, and it is the most transferable of the venture formats because it is what the job is. A round is priced, the partnership has a return bar, and somebody has to say in writing what would have to be true. The memo is the artifact the investment committee actually reads, and naming a price is what distinguishes an investor from a commentator.
About This Venture Investment Memo Case Study
Venture Investment Memo case study for venture & growth interviews. 420-minute format covering arr multiple against growth-adjusted peers, net dollar retention diligence, sales efficiency at the scaling inflection. 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
200K+ students have used IB Vine to help land offers at top firms.
Moelis & Co.
“I loved IB Vine. I’m going into Private Capital Advisory (PCA); you have the lessons on there for PCA and that was actually a game changer. I went into those interviews and knew about the core PCA concepts like net asset value, primary fundraising vs. secondary advisory, etc. I swear I was on IB Vine like a few hours a day. The opportunity to have that learning section and go through the questions people submit and everything — there’s no better tool out there. I loved the guides/lessons. The user interface is amazing. The way you’ve simplified it is so spectacular — it’s just so much easier to digest. It’s fun to use too; I’d rather use IB Vine than scroll through a guide. To be honest, I think the product is perfect. I genuinely owe you a big thanks.”
Moelis & Co.
“IB Vine is a tool we really love to use in the club I’m a part of, and there’s really no other resource like it. You guys do a phenomenal job with the question bank. I recruited specifically for Energy banking, and IB Vine was my most used resource for generalist questions (which were about 50% of my interview questions; the rest being Energy-specific); the majority of such questions I saw in interviews were at least similar (if not the same) to the ones on IB Vine.”
Perella Weinberg
“Once I read through the BIWS learning guides, I really didn’t refer to them again. I didn’t even really run through the 400 question guide once I found IB Vine, which I heard about through one of my classmates. We even get a free subscription (like most business schools) to Wall Street Prep, and if I’m being completely honest, I never even logged in to WSP. IB Vine is pretty much the only tool I used (along with our club question bank & mock interviews with peers) and it was invaluable for recruiting.”
Cantor Fitzgerald
“What a platform, made such a huge difference. I did superdays at Evercore, PJT, M. Klein and Barclays among others from a non-target school and did not miss a single technical in any interview process through prepping with IB Vine.”
Barclays
“Very accurate questions and all of the solutions are easy to follow. At least 10 of the questions I studied through this platform appeared in my Round 1 or Superday interviews.”
TD Securities
“THANK YOU SO MUCH IB VINE, I COULD NOT HAVE DONE THIS WITHOUT YOU, SERIOUSLY!!! IB Vine was the best website ever. I spent at least two hours on this daily (seriously) from October through I get my offer in February.”
Citadel
“I’m doing public equities this summer and next. I know the name is “IB Vine” but at the undergrad level a lot of the technicals across public equities are the same as investment banking. I recommend your software to all my friends!”
Piper Sandler
“I loved this site! 1000% this is the best resource I used in the process.”
Lazard
“This was the greatest tool ever. I genuinely enjoyed running through the technicals/behaviorals and it was very helpful!”
Houlihan Lokey
“IB Vine was the most helpful resource I had during recruiting. I will continue to promote it to other students at WashU and elsewhere.”
Jefferies
“Awesome product, helped me crush my technicals in my interviews and land a great role. Thank you, seriously was a huge help.”
Morgan Stanley
“Very helpful to get real-life questions unlike the 400 guide, especially for merger math. Built deeper understanding of key concepts.”
Houlihan Lokey
“Extremely helpful study tool that carried me through the recruitment process from start to end.”
Evercore
“You guys are doing great work over there with IB Vine. Absolute staple for interview prep.”
Rothschild
“IB Vine was incredibly helpful and I am forever thankful for all the help.”
RBC
“IB Mock was amazing - I used it for multiple hours. Also the flashcards and the lessons features on IB Vine were fantastic. Thank you!”
Dragoneer
“IB Vine is such a great platform, really impressive. There is so much value in this. The audio podcasts / mock interview library are pretty incredible.”
Case Study Preparation
Explore All Case Studies
100+ case studies, each with the full prompt, supporting materials and an audio walkthrough; most also ship a model answer deck and a tied-out Excel model.
Every case has a public page like this one. The member library is the signed-in index members work through.