![]() CATEGORIES: BiologyChemistryConstructionCultureEcologyEconomyElectronicsFinanceGeographyHistoryInformaticsLawMathematicsMechanicsMedicineOtherPedagogyPhilosophyPhysicsPolicyPsychologySociologySportTourism |
Moneyvaluation.Forexample, if aninvestoreceivesone-thirdof thecompany'sequityfora $1 millioninvestmentth, epost-monevyaluationis$3million(3x $1 million)andthepre-moneyvaluationis$2million(the$3 millionpost-moneyvaluationminusthe$1 millioninvestment). Todeterminethevalueof theemergingbusiness, venture Capitalistswill conductanin-depthfinancialanalysis. (43) """""""'''''''''''' Formanyearly-stagebusinessesfi,nancial Projectionsaresouncertainthatcurrentconditionsin the Venturemarketmaybethemostimportantsinglefactorin Determiningvaluation.Forexample, if moststart-up Businesses in thesoftwareindustryarereceivingfirst-round pre-moneyvaluationsof approximately $2 millionata given Time,thenegotiationfor aparticularinvestment mayfocusnot Ontheprecisefinancialforecastfortheparticularbusiness, but Onthewaysin whichthatparticularbusinessdiffersfromthe 'typical'softwarestart-up.(44).. Anothercriticalpartof theanalysiswill bethelikelyneedfor, Andsizeof,prospectiveroundsof financingthatmaybe requiredbeforetheventurecapitalistis ableto 'cashout' its investment(.45) ....................... Oncevaluationis establishedth, epricepersharecanbe Calculate(d4.6) Equitoywnershtiphatis Assignedto or includedinthepre-moneyvaluationdoesnot Dilutetheequityinterestreceivedbytheventurecapitalist. Thereforeonepointof negotiationthatshouldbeaddressedby Companiesis whetherrightsto acquirestockthatexistor are Createdat thetimeof investment, includingsharesreserved For employeestockoptionsorsharesissuableuponexerciseof Warrants,areto beconsideredoutstandingbeforethe investmenotraftertheinvestment(.47) """""" ...... Attimes,valuationnegotiationsmayreachanimpasse.In Orderto bridgeagapbetweentheentrepreneuarndinvestor, Performance-baseadjustmenmt echanismms aybe Employed. (48) Thepracticaleffectof these Mechanismsis oftento shiftinvestment riskfromtheventure Capitalisto theentrepreneur. A Key distinguishing factors include experience and depth of the management Team, state and proprietary nature of the technology, competitive environment And similar factors. B These devices, which adjust the number of shares received by the investor (through the use of warrants, conversion price adjustments or other means), Operate only when the company achieves (or fails to achieve) a preset financial Or business milestone. C In the former case, dilution is borne solely by the founders, and in the latter Case, dilution is borne ratably by the founders and the venture capital investors. D Once a venture capitalist makes a preliminary decision to invest in an emerging Business, the parties must negotiate the terms of the investment. E Continuing with the above example, if the company has 500,000 shares of Common stock outstanding prior to the investment, the venture capitalist will pay $4 per common stock equivalent share and receive 250,000 shares for its $1 Date: 2015-12-11; view: 827
|