For startups seeking to join the ranks of “unicorns”- private companies with billion-dollar valuations- the venture capital climate has never been more favorable. The number of private companies receiving billion-dollar valuations has ballooned in recent years1 and as of 2015, a record 41 companies have received exactly such a valuation.2. However, these sought-after valuations are…
Tag: Valuation
The Square IPO and Unease over Tech Bubble 2.0
Last week, mobile payment company Square launched its IPO at $9 per share, closing the day at a 45% gain of $13.07.1 However, in spite of ending the day at a gain, Square’s IPO opening share price was lower than expected.2 As of early last week, it was speculated that the company would open at…
Too Big To Succeed: How Liquidation Preference May Be Driving Unsustainable Valuations
When startups begin to negotiate for venture financing, most are primarily focused on maximizing their valuations. While founders are wise to focus on the valuation term given its importance to the company’s public perception and financial position, that focus may ultimately be leading founders to undermine their own interests. When venture capitalists (VCs) invest in…
Will Pension Funds Leave Hedge Funds?
There are growing concerns that hedge funds, referred to as the “gold rush of the 21st century,” are troubling investments for pension funds.1 For instance, pension funds have decreased their investments in hedge funds by 25% from 2011 to 2014. 2 In September 2014, Calpers, the California Public Employees’ Retirement System, stunned the investment world…
The Benefits and Complications of Big Data
The type of significant decisions that drive businesses, big and small, in their attempts to better react to customers’ needs have increasingly been driven by big data. Big data refers to “the recent wave of electronic information produced in greater volume by a growing number of sources (i.e., not just data collected by a particular…
Transfer Pricing and Tax Consequences
The United States has the highest corporate tax rate in the developed world. 1 Hence it is no surprise that corporations may try to avoid recognizing income in order to avoid paying taxes on that income. One of the ways a multinational corporation can achieve this result is by manipulating their transfer prices with foreign affiliated…
Divergent Incentives in Secondary Buyout Transactions Cause Limited Partners to Shoulder Downside Risk Alone
Over the past year secondary buyout transactions have become the increasingly common move of primary private equity fund managers seeking to exit their portfolio company investments in Europe and the United States. Secondary buyouts, also referred to colloquially as “pass the parcel” deals, occur when one private equity firm sells its stake in a portfolio…
Convertible Notes and the Golden Age of Seed Financing
What is a Convertible Note? A convertible note is essentially short-term debt that converts into equity at the closing of a Series A round of financing.1 Essentially, an investor will loan a certain amount of money to a startup in return for a note with terms defining how the equity distribution will work.2 Generally, the…
Private Equity Investment in Global Shipping Industry
Over 90% of world trade activity depends on the shipping industry and a global fleet of 58,000 ships.1 Shipping has traditionally been controlled by wealthy families that have been in the business for a very long time, some for centuries.2 However, shipping has changed and has become an asset for investors.3 Shipping is a cyclical…
Google’s $3.2 Billion Acquisition of Nest is a Big Win for Silicon Valley Venture Capitalists, Signals Search Giant’s Increasing Presence
On January 13, 2014, Google announced it was purchasing Nest Labs, known for making “smart” home thermostats, for $3.2 billion.1 The acquisition was Google’s biggest since a 2012 purchase of another hardware maker, Motorola.2 The US Federal Trade Commission approved the deal in early February.3 Google’s purchase of Nest produced exceptional returns for several Silicon…