2025-04-20-KROLL-在市场下跌中评估清算偏好的价值（英）_8页_2mb

Portfolio Valuation Whitepaper Summary

Core Content

This whitepaper explores the impact of liquidation preferences (LPs) on startup valuations, particularly in the context of down-round financing events. It emphasizes the importance of understanding how LPs affect the distribution of proceeds during liquidity events and how they influence investor behavior and corporate governance.

Main Points

1. Understanding Liquidation Preferences

• Liquidation preferences are contractual terms that prioritize preferred shareholders' returns in exit scenarios.
• LPs can significantly affect the perceived value of a company, especially during down rounds.
• There are two primary types of LPs:
  • Non-participating LPs: Preferred shareholders receive their LP first, and the remaining proceeds go to common shareholders.
  • Participating LPs: Preferred shareholders receive their LP and then participate in the remaining proceeds, which can reduce the value available to common shareholders.

2. Impact of Down Rounds

• Down rounds occur when new funding is raised at a lower valuation than previous rounds.
• These rounds can negatively impact the equity stakes of founders, employees, and previous investors.
• Companies often use various financing strategies (e.g., SAFEs, convertible securities) to maintain headline valuations while diluting equity.

3. Downside Protection and Investor Behavior

• LPs act as a form of downside protection, allowing preferred shareholders to recover their investment before common shareholders.
• However, high LPs can deter new investors and reduce the overall valuation of the company.
• LPs can also influence exit strategies, with preferred investors pushing for earlier exits to secure returns.

4. Enforceability of LPs

• LPs are enforceable through contractual agreements and judicial precedents.
• However, enforcement is complicated by the conflict between preferred and common shareholders.
• Boards of Directors have fiduciary duties to common shareholders, which may limit their ability to prioritize preferred claims.

5. Valuation of LPs

• The value of LPs should be considered as a combination of downside protection and upside return.
• A 1.0x LP at entry includes both components, while in a down round, the upside return component may decrease, reducing the overall value of the investment.
• Valuation methods like the hybrid approach (combining scenario-based and option pricing methods) are recommended for early-stage companies with complex capital structures.

Key Case Studies

• Klarna: Experienced an 85% valuation drop in 2022 due to market conditions, but showed recovery by 2025.
• WeWork: Used LPs as part of a bailout, placing existing investors ahead of SoftBank in liquidation.
• Paytm: Faced a dramatic valuation decline in 2022 but showed resilience in 2024 due to improved business conditions.
• Trados: Preferred shareholders received significant payouts during a sale, leaving common shareholders with little.
• Nine Systems: Common shareholders received minimal proceeds, leading to legal challenges over fairness and disclosure.
• Instacart: Preferred investors faced substantial losses during the IPO, as LPs did not provide downside protection.

Conclusion

• LPs are a critical component of venture capital investment structures.
• They provide downside protection but can complicate the valuation and exit processes.
• Enforceability of LPs depends on contractual terms, judicial decisions, and corporate governance.
• As the market becomes more challenging, understanding and negotiating LPs becomes increasingly important for both investors and founders.

Authors

• Steven Nebb
  Managing Director, Portfolio Valuation
  Email: steven.nebb@kroll.com
  Phone: +1 4156935313

• Navodit Mittal
  Director, Portfolio Valuation
  Email: navodit.mittal@kroll.com
  Phone: +91 2266231095

About Kroll

• Kroll is a leading independent provider of financial and risk advisory services.
• It offers M&A advisory, capital raising, and secondary market advisory services in the U.S. and U.K., and valuation advisory services in India.
• Kroll’s expertise spans a wide range of financial instruments and industries, with a focus on providing fair and supportable valuations.