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Post-money Valuation
Post-money valuation is a way of expressing the value of a company after an investment has been made. This value is equal to the sum of the pre-money valuation and the amount of new equity. These valuations are used to express how much ownership external investors, such as venture capitalists and angel investors, receive when they make a cash injection into a company. The amount external investors invest into a company is equal to the company's post-money valuation multiplied by the fraction of the company those investors own after the investment. Equivalently, the implied post-money valuation is calculated as the dollar amount of investment divided by the equity stake gained in an investment. More specifically, the post-money valuation of a financial investment deal is given by the formula PMV = N \times P , where ''PMV'' is the post-money valuation, ''N'' is the number of shares the company has after the investment, and ''P'' is the price per share at which the investment was ma ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Pre-money Valuation
A pre-money valuation is a term widely used in the private equity and venture capital industries. It refers to the valuation of a company or asset prior to an investment or financing. If an investment adds cash to a company, the company will have a valuation after the investment that is equal to the pre-money valuation plus the cash amount. That is, the pre-money valuation refers to the company's valuation before the investment. It is used by equity investors in the primary market, such as venture capitalists, private equity investors, corporate investors and angel investors. They may use it to determine how much equity they should be issued in return for their investment in the company. This is calculated on a fully diluted basis. For example, all warrants and options issued are taken into account. Startups and venture capital-backed companies usually receive multiple rounds of financing rather than a big lump sum. This is in order to decrease the risk for investors and to motiv ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Venture Capital
Venture capital (often abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential or which have demonstrated high growth (in terms of number of employees, annual revenue, scale of operations, etc). Venture capital firms or funds invest in these early-stage companies in exchange for equity, or an ownership stake. Venture capitalists take on the risk of financing risky start-ups in the hopes that some of the firms they support will become successful. Because startups face high uncertainty, VC investments have high rates of failure. The start-ups are usually based on an innovative technology or business model and they are usually from high technology industries, such as information technology (IT), clean technology or biotechnology. The typical venture capital investment occurs after an initial "seed funding" round. The first ro ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Angel Investor
An angel investor (also known as a business angel, informal investor, angel funder, private investor, or seed investor) is an individual who provides capital for a business or businesses start-up, usually in exchange for convertible debt or ownership equity. Angel investors usually give support to start-ups at the initial moments (where risks of the start-ups failing are relatively high) and when most investors are not prepared to back them. In a survey of 150 founders conducted by Wilbur Labs, about 70% of entrepreneurs will face potential business failure, and nearly 66% will face this potential failure within 25 months of launching their company. A small but increasing number of angel investors invest online through equity crowdfunding or organize themselves into angel groups or angel networks to share investment capital, as well as to provide advice to their portfolio companies. Over the last 50 years, the number of angel investors has greatly increased. Etymology and origin T ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Market Capitalization
Market capitalization, sometimes referred to as market cap, is the total value of a publicly traded company's outstanding common shares owned by stockholders. Market capitalization is equal to the market price per common share multiplied by the number of common shares outstanding. Since outstanding stock is bought and sold in public markets, capitalization could be used as an indicator of public opinion of a company's net worth and is a determining factor in some forms of stock valuation. Description Market capitalization is sometimes used to rank the size of companies. It measures only the equity component of a company's capital structure, and does not reflect management's decision as to how much debt (or leverage) is used to finance the firm. A more comprehensive measure of a firm's size is enterprise value (EV), which gives effect to outstanding debt, preferred stock, and other factors. For insurance firms, a value called the embedded value (EV) has been used. It is also ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Public Company
A public company is a company whose ownership is organized via shares of stock which are intended to be freely traded on a stock exchange or in over-the-counter markets. A public (publicly traded) company can be listed on a stock exchange (listed company), which facilitates the trade of shares, or not (unlisted public company). In some jurisdictions, public companies over a certain size must be listed on an exchange. In most cases, public companies are ''private'' enterprises in the ''private'' sector, and "public" emphasizes their reporting and trading on the public markets. Public companies are formed within the legal systems of particular states, and therefore have associations and formal designations which are distinct and separate in the polity in which they reside. In the United States, for example, a public company is usually a type of corporation (though a corporation need not be a public company), in the United Kingdom it is usually a public limited company (plc), i ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
In-the-money
In finance, moneyness is the relative position of the current price (or future price) of an underlying asset (e.g., a stock) with respect to the strike price of a derivative, most commonly a call option or a put option. Moneyness is firstly a three-fold classification: * If the derivative would have positive intrinsic value if it were to expire today, it is said to be in the money; * If the derivative would be worthless if expiring with the underlying at its current price, it is said to be out of the money; * And if the current underlying price and strike price are equal, the derivative is said to be at the money. There are two slightly different definitions, according to whether one uses the current price (spot) or future price (forward), specified as "at the money spot" or "at the money forward", etc. This rough classification can be quantified by various definitions to express the moneyness as a number, measuring how far the asset is in the money or out of the money with res ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Warrant (finance)
In finance, a warrant is a security that entitles the holder to buy or sell stock, typically the stock of the issuing company, at a fixed price called the exercise price. Warrants and options are similar in that the two contractual financial instruments allow the holder special rights to buy securities. Both are discretionary and have expiration dates. They differ mainly in that warrants are only issued by specific authorized institutions (typically the corporation on which the warrant is based) and in certain technical aspects of their trading and exercise. Warrants are frequently attached to bonds or preferred stock as a sweetener, allowing the issuer to pay lower interest rates or dividends. They can be used to enhance the yield of the bond and make them more attractive to potential buyers. Warrants can also be used in private equity deals. Frequently, these warrants are detachable and can be sold independently of the bond or stock. In the case of warrants issued with pre ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Option (finance)
In finance, an option is a contract which conveys to its owner, the ''holder'', the right, but not the obligation, to buy or sell a specific quantity of an underlying asset or instrument at a specified strike price on or before a specified date, depending on the style of the option. Options are typically acquired by purchase, as a form of compensation, or as part of a complex financial transaction. Thus, they are also a form of asset and have a valuation that may depend on a complex relationship between underlying asset price, time until expiration, market volatility, the risk-free rate of interest, and the strike price of the option. Options may be traded between private parties in ''over-the-counter'' (OTC) transactions, or they may be exchange-traded in live, public markets in the form of standardized contracts. Definition and application An option is a contract that allows the holder the right to buy or sell an underlying asset or financial instrument at a specified strike ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Employee Stock Ownership Plan
Employee stock ownership, or employee share ownership, is where a company's employees own shares in that company (or in the parent company of a group of companies). US employees typically acquire shares through a share option plan. In the UK, Employee Share Purchase Plans are common, wherein deductions are made from an employee's salary to purchase shares over time. In Australia it is common to have all employee plans that provide employees with $1,000 worth of shares on a tax free basis. Such plans may be selective or all-employee plans. Selective plans are typically only made available to senior executives. All-employee plans offer participation to all employees (subject to certain qualifying conditions such as a minimum length of service). Most corporations use stock ownership plans as a form of an employee benefit. Plans in public companies generally limit the total number or the percentage of the company's stock that may be acquired by employees under a plan. Compared with ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Liquidation Preference
A liquidation preference is one of the primary economic terms of a venture finance investment in a private company. The term describes how various investors' claims on dividends or on other distributions are queued and covered. Liquidation preference establishes that certain investors receive their investment money back first before other company owners in the event the company is sold, has a public offering, pays dividends, or has another liquidation (payout) event. Types Liquidation preferences can be partial (they apply to less than 100% of investment funds), full (100%), or at a multiple of original investment funds. Further, interest or guaranteed dividends may or may not be added to the preference amount over time. Occasionally the multiple shifts over time as well. Another distinction is that preferences may be "participating", meaning investors receive their preference first and are then entitled to a share of any remaining funds based on their ownership, or they may be "non ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Participating Preferred Stock
Participating preferred stock is preferred stock that provides a specific dividend that is paid before any dividends are paid to common stock holders, and that takes precedence over common stock in the event of a liquidation. This form of financing is used by private equity investors and venture capital (VC) firms. Holders of participating preferred stock have the choice between two payoffs: a liquidation preference or an optional conversion. In a liquidation, they first get their money back at the original purchase price, the balance of any proceeds is then shared between common and participating preferred stock as though all convertible stock was converted. In an optional conversion, all shares are converted into common stock. Holders of participating preferred stock will always pick the option with the highest payoff. In a liquidation, participating shares distribute the remaining assets with common stock pro rata. Pro rata means as a function of number of common shares on an as ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Ilya Strebulaev
Ilya A. Strebulaev is a Russian-American financial economist. He is the David S. Lobel Professor of Private Equity and Professor of Finance at the Stanford University Stanford Graduate School of Business, Graduate School of Business, where he has been on the faculty since 2004. He is also a research associate at the National Bureau of Economic Research. Strebulaev's research has focused on dynamic corporate finance. Recently, he has been working on issues related to venture capital and financing innovation. In his research on valuation of Unicorn (finance), unicorns (highly valued venture capital backed companies), Strebulaev finds that unicorns are overvalued by more than 50%. In 2007 Strebulaev won the Brattle Prize, Brattle Award first paper prize (Journal of Finance) for his paper "Do Capital Structure Tests Mean What They Say?". In 2011 he won the Fama-DFA Prize, Fama-DFA best paper prize (Journal of Financial Economics) for his paper "Corporate Bond Default Risk: A 150-Year ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
