The report follows another widely read report by the law firm Fenwick & West. It analyzed the financing terms of 37 U.S.-based venture-backed companies that raised money at valuations of $1 billion or more in the 12-month period ending March 31 and reported that, in all cases, investors in these financings received significant downside protection in case the companies’ value declines. (Called a liquidation preference, the companies’ later-stage investors have basically received the right to get paid ahead of other investors, as well as the companies’ management teams and employees.)
“In many of these cases, company valuations could fall 80 percent in value, and investors would still get their money back,” Barry Kramer of Fenwick & West told this reporter in May, when the report was published.
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