The HemoShear case is made to provide a chance for students to factor in the dilution of a potential Series D round in the valuation of the Series C round. It also emphasizes the issue of whether venture capitalists will treat the Series D round as a fourth round of funding or as a first round of institutional financing.
This discourse is structured to shed light on the contrasts in targets and return requirements of angel investors and venture capitalists. Because the evolving nature of HemoShear’s technology isn't well captured by the VC or DCF techniques of valuation, the case also mentions other pharmaceutical companies that used real alternatives as a valuation approach, which is designed to be discussed qualitatively within the context of the other issues addressed in the case. This case is analyzed in Darden’s “Entrepreneurial Finance” optional.
HemoShear, LLC, is a startup firm with promising technology that can give pharmaceutical companies state-of-the-art insight into efficacy and the safety of their new drug compounds.
In March 2012, the company seeks to raise $3 million in a Series C round from angel investors to scale the company, add essential management staff, and proceed to a new facility.
Before the Series C round, HemoShear had raised $700,000 in two pals-and-family rounds to complete proof-of-concept studies and establish an independent testing facility; another $8.4 million was raised in subsequent Series An and Series B angel rounds to fund continued development. Although the company has made considerable strides in developing business and its research, it really is likely the company in question would accumulate $10 million during a Series D round by either two or three years.
During that moment, by thoroughly utilizing the resources of domestic angel investors, HemoShear might have to turn to venture capitalists to raise the Series D round financing.
Publication Date: 10/07/2013
This is just an excerpt. This case is about Finance
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