5 ms·

Stupid question: how does a $245 million dollars bring a company's valuation from $9 billion to $20 billion? Last I checked, $245 million =/= $11 billion

by briga 8y ago

sophiebits 8y ago
It means a VC paid $245 million to purchase 1.225% (which is $245M divided by $20B) of Stripe's stock.
- adtac 8y ago
  In transactions, is it typical to just create new stock such that the newly created stock is 1.225% of the final total? Would the previous investors agree to diluting their stock like that? Or is it common to sell from a common pool of stock that's owned by the company (who is that? the CEO? what is the company if not for the stock distribution?)?
  - roel_v 8y ago
    You should read a book on this, it's not something that someone can/will explain in a one off paragraph comment.
    - adtac 8y ago
      Any recommendations? Thanks!
      - roel_v 8y ago
        I was assigned several in lae school, they wouldn't be relevant to you. Any introduction book on corporate structure and corporate governance would do as a foundation (for your jurisdiction) I would imagine, any specific questions you would have after that would be answered in the followup material in the references of such a book. Business school and law school students have to buy many books on these topics, and their resale value is low. Any second hand book shop has lots of them, so does abebooks. It doesn't have to be expensive, it's the time you have to invest that 'costs' (in the generalized economic sense) the most.
    - fierro 8y ago
      I would also like a rec
eloisant 8y ago
That means the investor agrees that at the time he buy stocks, the company is no longer worth $9 billion but it's worth ($20 billion - $245 million). Basically because they developped their business, their technologies, hired/trained people, they "created" value and the company is worth more than before. The funding itself doesn't increase the company valuation, but it validates it. Before funding the board can declare that the company is worth $XX billion, but the fact that an investor agrees to put money on the basis of that valuation makes it real.
erikpukinskis 8y ago
https://signalvnoise.com/posts/1941-press-release-37signals-valuation-tops-100-billion-after-bold-vc-investment https://signalvnoise.com/posts/1941-press-release-37signals-...

Stupid question: how does a $245 million dollars bring a company's valuation from $9 billion to $20 billion? Last I checked, $245 million =/= $11 billion

by briga 8y ago

Stupid question: how does a $245 million dollars bring a company's valuation from $9 billion to $20 billion? Last I checked, $245 million =/= $11 billion

sophiebits 8y ago

It means a VC paid $245 million to purchase 1.225% (which is $245M divided by $20B) of Stripe's stock.

adtac 8y ago
In transactions, is it typical to just create new stock such that the newly created stock is 1.225% of the final total? Would the previous investors agree to diluting their stock like that? Or is it common to sell from a common pool of stock that's owned by the company (who is that? the CEO? what is the company if not for the stock distribution?)?
- roel_v 8y ago
  You should read a book on this, it's not something that someone can/will explain in a one off paragraph comment.
  - adtac 8y ago
    Any recommendations? Thanks!
    - roel_v 8y ago
      I was assigned several in lae school, they wouldn't be relevant to you. Any introduction book on corporate structure and corporate governance would do as a foundation (for your jurisdiction) I would imagine, any specific questions you would have after that would be answered in the followup material in the references of such a book. Business school and law school students have to buy many books on these topics, and their resale value is low. Any second hand book shop has lots of them, so does abebooks. It doesn't have to be expensive, it's the time you have to invest that 'costs' (in the generalized economic sense) the most.
  - fierro 8y ago
    I would also like a rec

eloisant 8y ago

That means the investor agrees that at the time he buy stocks, the company is no longer worth $9 billion but it's worth ($20 billion - $245 million). Basically because they developped their business, their technologies, hired/trained people, they "created" value and the company is worth more than before. The funding itself doesn't increase the company valuation, but it validates it. Before funding the board can declare that the company is worth $XX billion, but the fact that an investor agrees to put money on the basis of that valuation makes it real.

erikpukinskis 8y ago

https://signalvnoise.com/posts/1941-press-release-37signals-valuation-tops-100-billion-after-bold-vc-investment https://signalvnoise.com/posts/1941-press-release-37signals-...