Much speculation surrounded Square’s IPO. Facing a struggling IPO market and steep competition from companies such as Apple and PayPal, many wondered if Square could reach its fundraising goals. These fears were confirmed when Square set its IPO price at $9 per share, well below the expected range of $11-$13. However, after its public debut on November 18th, shares opened at $11.20, and at one point, increased more than 64 percent. Square closed its first day of trading at $13 per share, still 45 percent above its initial public offering price.
Square’s IPO and the Tech Industry
Mutual Fund’s Devaluation of Snapchat Raises Concerns for Tech Startups
The number of unicorns, companies valued at over $1 billion, has greatly increased, growing from 43 companies at the beginning of 2014 to around 128 companies in November. However, these companies are often difficult to value because the shares are privately held and there is no readily available market price. This is a serious problem for mutual funds since they are legally obligated to value each of their portfolio holdings everyday. The values can fluctuate between mutual funds as firms use different methods to value startup companies.
On November 10, 2015, Fidelity devalued its stake in Snapchat by 25%. Fidelity also devalued several more startup companies: Blue Bottle Coffee, Dataminr, Zenefits, and others. These markdowns may suggest that the market is slowing down or that these companies’ values were inflated. The high valuations might have also been a result of competition between investors to acquire the next big startup, driving up valuations. Fidelity is not the only fund devaluing its stake in startups, as the asset manager Blackrock devalued Dropbox.
Tesla’s Unreliability: Instead of Correcting Issues, Focus Shifts to New Model 3
After Consumer Reports released its annual survey of vehicle reliability on October 20, Tesla Motors Inc.’s stock prices took a significant hit, dropping 6.6 percent that day, and have continued to fluctuate since.
Tesla is no stranger to this type of fluctuation nor to the impacts of publicity. In fact, in May 2013, after Consumer Reports gave the Model S the best review of any car in the magazine’s history, stock prices soared over 40 percent within days. In October of that same year, when reports of two Tesla vehicle fires became public, stock prices dropped by 10 percent within two days, and when a third fire was reported in November of that year, prices again plummeted. Despite the fluctuations, Tesla has responded with spectacular customer service, innovation, introductions of its vehicles in new markets, and a showing of strong growth.
Recap: “Venture Capital Speaker Series: Stephanie Brecher, General Counsel of New Enterprise Associates”
How does a Berkeley Law graduate end up as the General Counsel of one of Silicon Valley’s top venture capital firms? What does a day in the life of a General Counsel look like and what are the best steps to take to reach a similar prestigious career?
On September 29, Stephanie Brecher, a 1993 U.C. Berkeley Law graduate and General Counsel of New Enterprise Associates (“NEA”), addressed these questions and others to a group of law students in Boalt Hall on the U.C. Berkeley campus.
Ms. Brecher discussed her path from Berkeley Law to NEA. In the start of her career, she described herself as an “accidental tourist” in corporate law. After graduation, Ms. Brecher held a clerkship in the Central District of California. Upon completion of her clerkship, she decided not to take the position she had initially planned on, and instead she accepted a position as an associate at Steptoe & Johnson in Washington, D.C., where she hoped to work in international law, but was placed on the corporate team. After this position she worked as in-house counsel in Silicon Valley and spent nearly a decade at Nortel. Following her time at Nortel, Ms. Brecher returned to work at a law firm and became a partner at Sheppard Mullin Richter & Hampton before she acquired her position at NEA.
Unicorn Valuations and the Silicon Valley
Unicorn valuations and the problems related thereto are in the spotlight in Silicon Valley. Basically, this term is used when referring to invested start-up companies with a pre-money valuation (i.e., before a venture capital investment) equal to or greater than one billion dollars. This is in a context where, by nature, it is extremely hard to accurately determine the value of a start-up, as most of them do not have any operational background.
When a venture capital investor agrees to invest and acquire shares in a start-up with such a hefty valuation, it will most likely ask for several contractual guarantees aiming to ensure a minimum return on its investment, and that’s when problems may arise between investors and the founding shareholders.