NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Will Gornall

Sauder School of Business,
University of British Columbia
2053 Main Mall #877
Vancouver, BC V6T 1Z2
Canada

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org

NBER Working Papers and Publications

October 2017Squaring Venture Capital Valuations with Reality
with Ilya A. Strebulaev: w23895
We develop a valuation model for venture capital-backed companies and apply it to 135 U.S. unicorns – private companies with reported valuations above $1 billion. We value unicorns using financial terms from legal filings and find reported unicorn post-money valuation average 50% above fair value, with 15 being more than 100% above. Reported valuations assume all shares are as valuable as the most recently issued preferred shares. We calculate values for each share class, which yields lower valuations because most unicorns gave recent investors major protections such as a IPO return guarantees (14%), vetoes over down-IPOs (24%), or seniority to all other investors (32%). Common shares lack all such protections and are 58% overvalued. After adjusting for these valuation-inflating terms, al...
September 2016How Do Venture Capitalists Make Decisions?
with Paul Gompers, Steven N. Kaplan, Ilya A. Strebulaev: w22587
We survey 885 institutional venture capitalists (VCs) at 681 firms to learn how they make decisions across eight areas: deal sourcing; investment selection; valuation; deal structure; post-investment value-added; exits; internal firm organization; and relationships with limited partners. In selecting investments, VCs see the management team as more important than business related characteristics such as product or technology. They also attribute more of the likelihood of ultimate investment success or failure to the team than to the business. While deal sourcing, deal selection, and post-investment value-added all contribute to value creation, the VCs rate deal selection as the most important of the three. We also explore (and find) differences in practices across industry, stage, geograph...
November 2013Financing as a Supply Chain: The Capital Structure of Banks and Borrowers
with Ilya A. Strebulaev: w19633
We develop a model of the joint capital structure decisions of banks and their borrowers. Strikingly high bank leverage emerges naturally from the interplay between two sets of forces. First, seniority and diversification reduce bank asset volatility by an order of magnitude relative to that of their borrowers. Second, previously unstudied supply chain effects mean that highly levered financial intermediaries are the most efficient. Low asset volatility enables banks to safely take on high leverage; supply chain effects compel them to do so. Firms with low leverage also arise naturally as borrowers internalize the systematic risk costs they impose on their lenders. Because risk assessment techniques from the Basel II framework underlie our structural model, we can quantify the impact capit...
 
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