Editor’s Letter

Abstract

The authors rule out several possible reasons for this lack of performance, concluding that increased flow of capital into the space in recent years and lack of investment opportunities may have led VC/PE managers to overpay for these portfolio companies. The contract typically entitles VC funds to receive preferred stock with additional cash flow rights, resulting in a higher return to VC funds than the yield to other stakeholders. [...]according to the author, the current post-money valuation method is an overvaluation of the true price of all outstanding securities.