3 ms·
Bank Strategies and Tech Valuations
- chollida1 11y agoI posted this because there have been a fair number of articles lately about rachets, liquidation preferences and unicorn pricing. There is a paper that is linked to that is a great read: https://www.fenwick.com/Publications/Pages/The-Terms-Behind-the-Unicorn-Valuations.aspx https://www.fenwick.com/Publications/Pages/The-Terms-Behind-... > The protections, known among investors as structuring or ratcheting, can inflate a unicorn’s indicated valuation 10 percent to 25 percent, according to Rick Kline, a lawyer at Goodwin Procter whose firm does legal work on start-up and initial offering financings. The issue at hand is that late stage, or Mezzanine, funding rounds tend to push up valuations whit the down side of ratchets for the private equity firms. The private equity firms don't mind the valuation as they have downside protection. The founders have their large ownership percentage, its the employee's who are last in line to reap the benefits who stand to loose the most in these types of deals.