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Investors in the unicorn know it's a ridiculous market cap, but will lock in preferential payout on the exit. This is not a thing that happens in the vast majo
by harryh 8y ago
Investors in the unicorn know it's a ridiculous market cap, but will lock in preferential payout on the exit.
This is not a thing that happens in the vast majority of circumstances. Preferences are for downside protection not a way for investors to actually make money. No one invests with the goal of making use of them.
- bduerst 8y agoThe "vast majority of circumstances" are not investment rounds propping up a unicorn. Investors who play in this arena are not stupid: https://angel.co/blog/liquidation-preference-your-equity-could-be-worth-millions-or-nothing https://angel.co/blog/liquidation-preference-your-equity-cou...
- harryh 8y agoGood Technology had $556 million in funding: https://www.crunchbase.com/organization/good-technology https://www.crunchbase.com/organization/good-technology Per your link, they sold for $425 million. The investors lost money. That is not the outcome they were hoping for. However, their preferences did provide them downside protection which was, as I noted, their purpose.
- bduerst 8y agoPer both links: 1) Good Technology was valued at $1.1 Billion. 2) The investors lost money, but the employees lost much more. -> This is the problem with unicorns. You've completely missed the point.
- deleted 8y ago[deleted]
- harryh 8y ago#2 is not at all clear. Investors lost (collectively) over 125 million dollars. The only employess that lost money are those that exercised stock options and had to pay taxes on unrealized gains. It's highly doubtful that this totaled nearly as much as the investors lost.