Startups with a market capitalization of $1 billion have one thing in common

[Abstract] investors are required to have the right to priority liquidation, in this context, the risk of investment has been reduced to a minimum.


Re/code Chinese station on May 11th reported

only a short while ago, the market value of more than $1 billion in young start-ups are collectively referred to as the "unicorn", this is mainly because they are so rare, but now it seems to have It is quite common for enterprises.

in the past two weeks, the field of science and technology again witnessed the ratio of investment case forming, including the HR startup Zenefits completed $500 million financing, social photo sharing site Pinterest announced $367 million financing and Jawbone completed a new round of $300 million financing.

and now, there is news that Uber is about to complete the financing of $2 billion deal, after this round of financing Uber valuation will reach $50 billion (the same as FedEx Express market capitalization).

so we have to ask, what is today’s science and technology investors? Why are there so many start-ups can reach $one billion valuation level so casually? Those investors are not at the time of investment should be more cautious, and fully examine the risk of /p>? "

were analyzed according to the 37 investment company Fenwick and West Silicon Valley forensic case before the date for a full year in March 31st this year before the successful valuation of more than $1 billion of Private Held Company. The analysis found that as long as these enterprises can in the negotiation give a guarantee for the investors, and eliminate other potential risks if they successfully obtained financing to become the "unicorn" enterprise is not difficult. At the same time, Fenwick and West said all 37 transactions in a common ground is that investors are required to have the right to priority liquidation (Liquidation Preference).

"priority liquidation" is a very important term, is also a frequent venture capital agreement and investment contracts in the words. In simple terms, the "Liquidation Preference" determines the company in liquidation, after the sale of the cake is how the allocation of funds, how to hold the priority assigned to a particular series of shares to shareholders, and then assigned to other shareholders. In this clause, the risk investors face in the investment "unicorn" when the enterprise has been reduced to a minimum, because even if the investment enterprises in the future face of liquidation, investors can also rely on the terms of the allocation of funds priority right.

of course, this does not mean that all investment investors are able to sleep without any anxiety, because even if the investment enterprises go smoothly in the end of IPO, the IPO market may not be able to reach the previous valuation. For example, Box, New, Relic and Hortonworks after the market value of less than IPO

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