Prestige Names as Fundraising Stampede

"breakfast and discussed the strategy for the next three days. Unlike our first funding round, there would be no opportunity for detailed due diligence. Investors would be asked to state how much they * wanted to invest purely on the basis of our business plan and the impressive names that were already backing us. The underlying assumption — important to encourage — was that this round would be oversubscribed, and that investors would receive their reduced allocations according to the size of their bids. The incentive, therefore, was to bid high."

"investment. Over the next few days more offers came in from existing shareholders, including Bernard Amault of LVMH and 21Investimenti. The fact that we hadn’t increased our valuation was obviously seen as an opportunity too good to be missed regardless of our launch problems. It was a chance for investors to buy more shares, at the same cost, rather than having to pay a higher price as they would have expected in a new funding round. When all the offers were counted, they added up to $23 million — much more than we needed. In the allocation of shares that followed, Nader as our newest investor was scaled down to $4 million. I hoped he wouldn’t mind too much."

"office. He looked tired. “OK. This is the deal. He wants a discount for being the lead investor.’ This seemed fair enough. LVMH was a prestigious name whose support would guarantee our reputation in the market. Tellio wanted a 10 per cent stake for $3.8 million, instead of the $5 million we were asking. More importantly, he wanted a 25 per cent discount for investing in the next funding round. This meant that if boo’s pre-money valuation was $100 million, LVMH could buy shares at a level of $75 million. Tellio had us. He knew that Benetton wasn’t ready to sign yet. And he knew we were running out of time."

"It was a good time to start planning what would be our biggest funding round to date. The delays to our launch, coupled with our incredible growth rate, meant we needed another $20 million to get us through the next two months. For the first time, we weren’t worried about whether we’d get the money. Ever since the media had pounced on our story a month earlier, Chris Bataillard of J.P. Morgan had been inundated with calls from potential investors. “This is going to be very straightforward,’ he told us. One of the first things we had to decide was a new valuation for the company. As always, this was a bit of a guessing game. Since we were still a.company without sales or profits, it came down to one question — what were people prepared to pay? Because of the buzz around us and the internet in general, we decided to double our pre- money valuation to $150 million and see what happened."