hunting cloud network (note: the author Jonathan Friedman is LionBird Israel, one of the partners will share ideas about vc at VCPOV.com.
early vc is a common law: just invest in a startup, every vote for a $1 reserve 2 to 3 times the amount of us dollars, purpose is to keep the ownership level in the portfolio companies, is also to be able to give their support at any time.
it is clear that for every company for as much money is not a good solution. Given the risk portfolio of double return, many companies reserve amount or even more than 2 to 3 times, but in the end is with a sieve.
so, in the portfolio of the VCS, how is your company’s perspective? What does this mean for your business? And look at the following analysis:
in the open market, time is of the core competitive ability, can let you profit also can let you lose money. Likewise, analysts also spent a lot of energy to establish a buy/sell rating, including the target price per share, this data will be on the quarterly report regularly updated.
although the relationship between VCS and entrepreneurs is unique, even more than analysts and chief financial officer of relations more complex, but the two groups will be regular adjustment target according to the latest situation. Therefore, similar to buy/sell rating framework can also be applied to the risk reserve and liquidation strategy.
when the VCS believe that, at the current price of investment when the company is the best choice, they will be the portfolio companies designated as “accumulation” rating. In a move to the next round of buying stocks, can get higher than in a certain extent, the amount of the proportional distribution.
, for example, if the VCS is convinced that the company has reached a critical turning point period, they may be renewed investment to improve its ownership.
when the case involves rapid growth companies with subsequent rounds of financing, the VCS might even buying shares in the secondary market, provide the bridging loans convertible, and this will lead to increased ownership.
when the VCS in the amount of subsequent rounds of investment portfolio companies is lower than the proportional distribution of amount, or when they do not participate in mark arrived at “cultivating” rating.
usually, VCS will actively in nominal investment in their portfolio companies. In this case, as long as the price of their stay in the range of “cultivating”, the company can to a certain extent, depend on the support of VCS.
unlike on the open market, investors can sell all of its shares at any time, the internal stock usually lack of liquidity. Also because of this, when the venture will be a company is divided into “harvest” rating, they will need to set an exit strategy.
only in both cases you can reach this level, either as a founder of you create the value for investors, and venture willing to start at the current price to sell the stock, or in the case of not optimistic as asset impairment.
the situation of the asset impairment generally occurs in a company spent all his money, or has been completely abandoned. As a founder, if you learn about the mergers and acquisitions do not represent enterprise export scale, then you will understand how much their incompetence.
on the other hand, only when a portfolio company valuations rise to represent the total portfolio of vc value, the VCS through secondary trading for its spend part or all of their chips.
just like the relationship between listed companies and investors will not end after the public listing, you wouldn’t be in the first round of financing investment after the end.
always keep in mind that you and other investors the opportunity to be the same, if you want them to financial support at or beyond the initial allocation of you, you will need to become very good, tell them why you would have been rendered “accumulation” rating.
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