Both Sides of the Table

SEPTEMBER 29, 2009

Three reasons: There is a relative valuation between the price a VC pays and their expectations of what it will exit for in an IPO or trade sale. Also, it’s harder to pay a $30 million pre-money value on an unproved company when you see public companies with $100 million in sales trading for less than $20 million.

Burn Rate 263

Burn Rate Valuation Pre-Money Valuation Private Equity 263

Tim Keane

JANUARY 12, 2010

It also assumes the entire value of the investment is captured for investors at a sale of the company in the time specified in the term-sheet.   On the last line on page two of the workbook, you see the resulting returns to the entrepreneur with a variety of terms and valuations and assumptions. Let’s start at the end.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

ithacaVC

DECEMBER 14, 2011

One final background point, a “liquidation event” is a sale of the company and typically NOT an IPO. With respect to the Series C round, let’s assume that the pre-money valuation is $12 million and that the VC investing is going to put in $4mm (and to keep things simple, let’s have only 1 Series C investor).

Liquidation Preference 49

Liquidation Preference LP Preferred Stock Liquidity Event 49