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Dell Appraisal Spawns a Multitude of Valuation Approaches

February 2017 | Issue 84 Introduction A Delaware Chancery appraisal case involving computer company Dell Inc. gave rise to a multitude of valuation measurements.  It is instructive to see how the court sorted through them in coming up with its final appraisal conclusion.  The case is In re Appraisal of Dell Inc., 2016 Del. Ch. LEXIS […] More...

Future Expected Investment Strategy Determines Value of FLP Interest

January 2016 | Issue 83 The estate of Helen P. Richmond held a 23.44% interest in Pearson Holding Co. (“PHC”), a family investment company.  The estate valued this holding at $3,150,000, later adjusted to $5,046,000.  The IRS valued it at $7,330,000.  This difference of opinion was aired in US Tax Court in a case called Estate […] More...

Do Attached Strings Affect the Value of a Gift?

October 2015 | Issue 82 Steinberg v. Commissioner, 145 T.C. No. 7 (Sept. 16, 2015) explores how a contingent liability accepted by a donee can impact the value of a gift for gift tax purposes. Introduction In 2007, Petitioner Jean Steinberg, age 89, entered into a net gift agreement under which she gave her four […] More...

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Sequoia Slideshow is the Talk of the Life Sciences Venture Summit

November, 2008 | Issue 28

About two dozen venture capitalists gathered in New York last week (October 30) at the 2008 Life Sciences and Healthcare Venture Summit to discuss the current state of the market for venture capital for life science and healthcare companies. Exhibit A to the discussion was a provocative and much-talked-about Power Point presentation that Sequoia Capital has recently sent to its clients and portfolio companies. Entitled “R. I. P. Good Times,” the presentation paints a gloomy view of the outlook for venture financing for early-stage companies, and provides advice to the management of such companies on how to survive what Sequoia foresees as a prolonged rough period in the capital markets.

After focusing on the causes of the current financial crisis, and the effect it is going to have on the availability of venture capital (not a good effect), Sequoia urges portfolio company management to “manage what you can control,” particularly spending, earnings assumptions and growth assumptions. Management was told to “batten down the hatches,” They were told that they should have “at least a year of cash, minimum, in the bank.” A copy of the slide show in its entirety can be found here.

The venture capitalists in attendance at the summit expressed in general the same opinions as Sequoia. A number made comparisons to the post 2000 tech meltdown, and spoke of wholesale downward revisions in valuations. The IPO market was described as moribund, leaving M & A as the only exit method currently available for an investor in an early-stage life science company. And the big pharma buyers, knowing that the IPO alternative is not there, have adjusted their pricing downward accordingly. Companies were urged to reduce their burn rates and to focus their efforts so that they will be able to tell a good story when it’s time to go after that next capital raise.

Investors were also urged to adjust to the new conditions, and to strive to make their capital “more efficient.” One way to do this is by advancing capital in smaller, multiple tranches, each advance based on a company’s reaching certain specific achievement benchmarks.

One attendee sought to cheer everyone up by stating that he was “gloomy but not doomy.” He pointed out that the current state of affairs might be considered a plus for really good companies, because it will have the effect of weeding out some of their second-rate competitors.