New FCs Flashcards
How many patents were brought in by Yaqrit?
5
In what form did Yaqrit’s money first come in?
As a convertible loan agreement (loan that converts into shares once the next money comes in with an investor agreement)
What is the hurdle rate for riskier projects? Why?
Riskier projects have higher hurdle rate to compensate for increased level of risk present
This is because the hurdle rate must represent appropriate compensation to the level of risk present
What is Hurdle Rate equal to
Break Even Yield
What does discount rate i account for
Risk (only considered by VCs, not economists)
Opportunity cost
Inflation
Do short term or long term bonds have higher yield?
Long term bonds have higher yields, because interest rates usually tend upwards in the future
What can happen to patent ownership?
It can be bought, sold or licensed
What is the Paris Convention?
With regard to patent filing
You can now file a priority application at T=0
This gives investors more time to get more money, while having already put in a patent application to protect themselves from prior art
When is your last chance to add any missing info to a patent application?
at T=12
When you file for International Application
When do you need to have all your money ready during patent application timeline?
At T=30
When you convert international application to national applications, and you need to pay fees to each country you have selected.
What is more important, use of funds or sales forecast?
USE OF FUNDS
Because it involved understanding the current market
Sales forecasts can be easily demolished because they are too far in the future
What is the difference between patentability and freedom to operate?
Patentability depends on all prior art;
Freedom-to-operate depends on the prior art in the
form of other patent
What is a down round
When a company offers additional shares for sale at a lower price than had been sold for in the previous financing round.
More capital is needed and the company discovers that their valuation is lower than it was prior to the previous round of financing
Up round
Round of investing where company valuation has increased, so value of shares has also increased
How do VCs make a profit?
By selling shares either:
- When company exits (is sold) to a larger company
- When the company enters the public stock market, and shares can be traded there
When do VCs buy equity? What type of equity do they buy?
They buy PRIVATE EQUITY (traded on private market)
What is the aim of a CARRY? why is it important?
It incentivised VC managers to make high financial return
It incentivises VC managers to make high returns
This is because investors are hands off, passive > they need to keep the VC managers motivated
How would a high risk startup keep you motivated to work there?
Give you options (opportunity to buy shares of company at reduced price)
This will keep you focused in making the startup succeed
How do you valuate your company?
No set way Look at what the market is willing to pay Base valuation on: - Grant funding - Potential (revenues) - Risk involved
What is the difference between going after angel funding and crowdfunding?
Angel funding: state how much you are eligible for, then individually negotiate
Crowdfunding: need to present a value
How do you know what to value the company at each round of investment?
You do not want dilution to be greater than 30%
Value company subsequently
What is liquidation?
When a business comes to an end and distributes its assets to claimants, as it can no longer pay its obligations (it is insolvent)
