- centrality. This is something from the network theory but my humble understanding was that centrality refers to the people being connected to relatively bigger number of people than average. However, it appears that it is also a measure of relative influence of one network member on the other;
- sector knowledge;
- experience in the cash-constrained environment;
- whether the members of the team worked together before
In the particular case we were looking at the only thing that was wrong with the management team was that they were too young: the oldest of them was 32. This is again a huge difference with what I see back at home, we have much younger people being trusted much more money (here the conversation was about $25 million).
Characteristics of the growth equity company:
- team that can take it from where it is now to liquidity;
- backlog of contracts, such that supports their projections for 18 months (?)
- working product
Additional clarity was brought into the question about the differences between the rounds and stages of financing. A round of financing requires unique pricer and different terms of financing, while a stage is the movement from A to a discernible B within the round of financing. Stages are distinguished as there may be different tranches within the same round.
I keep calculating terminal values using the multiples. This isn’t the best approach: the best thing to do is to use both multiples and growth rates + check to what growth rate the multiple is equivalent.
In evaluating financial and operating plans of a venture, the realm of reality is always below 100% of the plan.
When looking at the potential outcomes, we focus on the worst case scenario and work out the deal structure in such a way, so that we still get the desired IRR.
There is etiquette in the VC investment, one of its elements is not to take the share of the management team below 20%.
Related Articles
No user responded in this post