BRAVE: IPO Battles VS. Regulatory Giants, Boardroom Conflict & The Tech Lobby Game - E677
episode
BRAVE Southeast Asia Tech: Singapore, Indonesia, Vietnam, Philippines, Thailand & Malaysia Startups, Founders & Venture Capital VC (English)
23 min
1 speaker
8 chapters
transcribed 16 days ago
Transcript
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Transcript generated automatically by AI and may contain errors.
How do founders, boards, and banks negotiate IPO pricing and why does it become a tug‑of‑war?
Who decides the IPO of a price? That is a weird negotiation between the founders management team, the capital markets, and the investment banks. What will happen is that people knew that the equity price effectively was $39,000 per share. And obviously the founders and the management team and the sharehold board will have gone to the investment bank and said, Hey, we want this price to be forty five thousand and we will sell those shares. At 45,000 because we believe it'll pop to $50,000 on the first day of trading. But we're gonna sell that to our cornerstones and equivalents for $45,000 per share. And then obviously they went out to market, they went to see whether there's interest, and then investment bank was like, Hey, we can't get it at $45,000, nobody wants to buy.
But the price that the market would be willing to provide you because you want to raise $100 million, the price at which they're willing to give you $100 million would be roughly around $9,000. And then people, the board will go back and argue. And the board will say, no, if it's $9,000, we're all gonna lose money immediately. This is a horrible decision to make. And then the other team will be like, if we don't raise this money, we're going to not have enough money to survive as a company. Everybody's value is gonna go to zero. Better to raise a hundred million dollars at nine thousand dollars per share rather than have the company go to bus. You imagine that huge conflict at a board level. Welcome to Brave.
Learn from Southeast Asia's best tech leaders. Build the future, learn from our past, and stay human in between. No BS on Success. I'm Jeremy Al, Venture Capitalist, Sarah Founder, Harvard MBA, Science Fiction Nerd, and Dad of Two Daughters. Every week, we debate startup news, interview change makers, answer listener questions, and share personal insights. Join our movement of over 40,000 members and get transcripts, resources, and community at www.bravesea.com. Stay well and stay brave. Do the series A need to vote approval, series B, series C, that's where all the control rights will start coming out. Investors, when they negotiate a legal contract, often have the clause to have a pro rata, which means they have the right to maintain the ownership percentage that they have.
A company that does 20 investments, you normally buy 20% of the company, right? When you buy 20% of the company and the company's value doubles in the next round, if you did not top up your money, Your 20% will effectively become roughly 10% of the new company size. So you're allowed to pop up with more money to let you buy up additional 10% to maintain the ownership percentage of 20%.
Why do late‑stage investors often capture all the proceeds in an “underwater” IPO?
So you normally have a pro rata clause. That's relatively well respected because every investor knows that if you start disrespecting the pro rather clause, that everybody's going to start disrespecting your product, pro-rata clause. All the investors will normally play nice on the pro router clause on average, unless you're an angel, in which case, then everybody says thank you very much. You're raising 100 million. Half will be for your first investment, and half of that quantum will reserve for low-on investment. Exactly of this scenario, which is that if you see a winner that's home run, you want to double down on the investments. We give the example, which is if you have a hundred million dollar fund and you're making 20 investments, for example, you may deploy $50 million in 20 of those startups.
You're investing $2.5 million checks in 20 of those companies, right? But out of those 20 companies, you may say, I'm only going to see two home runs of that lot. Five. Out of the twenty, the top twenty-five percent of five that are left, I think will become the home runs. I have a chance to become the home runs. I'm going to deploy ten million dollars each.
How do incumbents like Verizon or Comcast use regulatory capture and lobbying to crush startup competition?
That's how you deploy your two tranches, right? So a hundred mil, fifty mil for a two point five million dollar check, and then your second half, a ten million dollar check. for of the remaining five companies that you think will be the home run, right?
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Chapters
8 chapters
1
How do founders, boards, and banks negotiate IPO pricing and why does it become a tug‑of‑war?
0:00–2:30
2
Why do late‑stage investors often capture all the proceeds in an “underwater” IPO?
2:30–3:27
3
How do incumbents like Verizon or Comcast use regulatory capture and lobbying to crush startup competition?
3:27–4:31
4
What’s the difference between Uber’s “permission‑or‑forgiveness” expansion strategy and Didi’s experience in China?
4:31–5:42
5
How do tech think‑tanks shape AI and privacy legislation behind the scenes?
5:42–7:29
6
Why do boardrooms clash over valuation versus survival during high‑stakes IPO negotiations?
7:29–9:08
7
How can startups turn their customer base into a political shield against regulatory pressure?
9:08–10:24
8
What role do venture‑capital firms play in lobbying, rule‑making, and navigating global regulatory regimes?
10:24–23:54
Speakers
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