HHL Public Lectures | Finance: Up or out? – Making the case for down rounds in current funding environments

Recent market developments and global events have led to a sharp decline in availability of venture capital for startups. Especially the shift from focusing on growth to profitability hit several businesses significantly, making re-adjustments the new normal. These changes are often reflected in funding terms as well, either via stricter clauses, like senior liquidation preferences or via lower valuations, such as down rounds. This session is dealing with the economic consequences of such trade-off from a founders and an investors perspective.

This session is part of a broader lecture series surrounding the topic of private equity (PE).

Together with his guest Julian Kaboth (Head of Finance at Point Nine Capital) Prof. Dr. Bernhard Schwetzler (HHL, Chair of Financial Management) discusses the interaction of valuations and contractual clauses in venture capital financing contracts in the current market situation. Julian is well equipped to this discussion as he has written his doctoral thesis on the impact of contractual clauses in VC financing contracts at the finance chair at HHL. He also collected extensive work experience in the startup area and holds a CFA degree

The following topics will be highlighted and exploratively analyzed in the session:

• Current market development and trends
• The problems when valuing startup companies
• Contractual clauses in VC financing contracts and their impact
• Down rounds and their implication for shareholding parties
• Relevant determinants regarding the decision “contractual clauses vs lower valuations”

The event language is English.