Download Assessing the Economic Value of Venture Capital Contracts by Jil Caroline Onimus PDF

By Jil Caroline Onimus

Jil C. Onimus makes a contribution to the nascent study line at the fiscal price a chance capital contracts which lies on the intersection a big gamble capital agreement layout and genuine choice pricing. She identifies the hampers of actual recommendations embedded in version enterprise capital contracts as released by way of the nationwide enterprise Capital organization (NVCA) and indicates how they are often priced in interplay utilizing rent Squares Monte Carlo simulation. The pricing version is calibrated through a dataset of deal phrases in Silicon Valley in addition to information from the NVCA. by way of employing the version to plain funding eventualities (multiple financing rounds with a number of investors), the writer obtains estimates of alternative values for person phrases and for complete contracts with interplay results.

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2 is broken down into three consecutive steps: (1) identify the pricing methodology applicable in the context of VC contract pricing and specify the general model parameters, (2) gradually build the VC contract pricing model by first analyzing groups of similar provisions and then combining the findings into a comprehensive model, and (3) provide an application of the model to standard investment situations in order to obtain numerical estimates of contract values. This translates into the detailed structure described in the following.

They may include contractual provisions that can be used similarly to standalone covenants. The major groups of financial instruments used by VC firms and relevant in the context of this thesis are defined on the following page. 3. Definitions 17 • Equity capital: ownership interest in a company. – Common stock or common shares (also called straight equity or junior equity): securities representing equity ownership in a corporation, providing voting rights (with one vote exercisable per share), and entitling the holder to participate in the company’s success through dividends, capital appreciation, or both.

Debt capital: capital which does not represent ownership in the company. Instead, the company borrows money in the form of non- 18 1 Introduction transferable loans or transferable securities (bonds, notes, mortgages), which is repayable at maturity. In exchange, it pays the creditor a fixed or variable interest, which depends on the credit rating of the debtor. With the exception of subordinated or junior debt, the creditor’s repayment takes precedence over the claims of equity holders in liquidation.

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