Will Crowdfunding Help Startups?
As most know, the JOBS Act passed by Congress in April provides a number of regulatory changes designed to facilitate capital formation for start-ups and early stage companies. One of the most significant provisions is a revised exemption from registration for relatively small (up to $1 million) offerings, typically sold to friends and family and other non-accredited investors. ThomsonReuters’ PEHUB recently published an excellent summary of some of the key advantages/disadvantages entailed in this financing strategy. (more…)
Will the New JOBS Act Change the IPO Landscape?
The pendulum is swinging back from very expensive, tight controls on smaller companies to more relaxed, less costly methods. The new JOBS Act will have a big impact on IPOs and access to private capital. (more…)
What Makes a Good 409A Valuation
It may sound like common sense, but a 409A valuation needs to satisfy certain minimum requirements: (more…)
409A Valuations in Turbulent Times – Part I
Turbulence in economic and industry conditions can have a significant impact on the result of a 409A valuation. This series of discussions describes some of the key elements where economic and market data play a role in the analysis. 409A valuations can be divided into two phases. In the first phase, an estimate of the total value of the company (enterprise value) is developed. In the second phase, the value is allocated to each class of equity. This dialogue addresses the impact of economic turbulence on the first part – the development of the enterprise value. (more…)
February 24, 2012 at 1:49 pm Gunther Hofmann Leave a comment
The Brenner Group Celebrates 25 Years
As I reflect back on the past 25 years, the company and I have seen many changes in Silicon Valley. The types of industries that venture firms invest in has changed dramatically, and there have been a number of business cycles – both up and down. (more…)
What is a Qualified Appraiser? Part Two
In the last blog post, we discussed the notion of a qualified appraisal that was introduced by the Pension Protection Act of 2006. Such an appraisal needs to be prepared by a qualified appraiser.
In this post, we will discuss the definition of a qualified appraiser. (more…)
What is a Qualified Appraisal? Part One
Taxpayers may deduct the fair market value (as determined by a qualified appraisal) of property that they contribute to charity from their taxable income. The Pension Protection Act of 2006 added the notion of a qualified appraisal to the tax code. A qualified appraisal made by a qualified appraiser is generally necessary to support the value of noncash charitable contributions of $5,000 or more. (more…)
December 20, 2011 at 2:50 pm Gunther Hofmann Leave a comment
Judging the Gigabit Challenge
Rich Brenner has been named a judge for The Gigabit Challenge, a global business plan competition to find disruptive ideas and bright passionate entrepreneurs. (more…)
What is the “Zone of Insolvency” We Keep Hearing About, and What Must an Officer or Director Do Once They Enter This Zone?
During the past few years, most small companies have heard someone refer to the Zone of Insolvency, and reference how dangerous this is to the Directors and Officers.
In this post, we will review what the definition of “zone of insolvency” is, and what Directors and Officers are supposed to do, and say, if they find themselves in or approaching this zone.
Insider Trading – Are VCs Dealing Themselves Inside Rounds?
Brian Broughman and Jess Fried put forth a study recently on insider rounds in venture-backed companies: Do VCs Use Inside Rounds to Dilute Founders? Some Evidence from Silicon Valley.
As the name implies, inside rounds are rounds of investment by existing investors, versus outside rounds that are led by new investors.
In our valuation practice, we are often confronted with clients having gone through inside rounds, and we need to make a determination if the pricing of those investments provides an indication of value of the equity of a company (regardless of which class of shares; but usually invested as preferred equity). Each case is different, but often such an investment is not a good indicator of value as it lacks arm’s length characteristics.
Although Broughman and Fried only cover a very limited geography (Silicon Valley), a very limited time frame (companies that were sold in 2003 and 2004), and had very specific exit circumstances (M&A), it provides a welcome quantitative analysis of such inside rounds. (more…)
