The company hopes to raise $648 million from its stock offering, according to reports. The offering will take place in the next few weeks.

When a company has an IPO, it sells shares to the public through a stock exchange such as the Nasdaq or the New York Stock Exchange (NYSE). It has an IPO typically to raise cash to fund operations, to build new stories or factories, or to conduct research and development, among other things.

But why is Dropbox selling shares to the public now?

What’s an exit?

Venture capitalists and other investors put money into a company not only because they believe in its vision and want to help it grow and become successful, but because they hope some day to make a profit from their investment, just like any other investor.

One way they do that is through something called an exit. An exit occurs when an investor, or set of investors, sells its ownership in a company, with the goal of making a profit. One way investors achieve an exit is through an IPO, which lets them sell their shares to the public.

What’s a “unicorn?”

All along, the company has a value. And as investors put more and more money into a company, its value typically keeps growing.

In the tech world, private companies that have reached a valuation of $1 billion or more are called unicorns. That’s a big milestone for any company to reach. There are about 200 of these today.

Dropbox was founded in 2007 by Drew Houston, and since that time, it’s received more than $1 billion in funding from outside investors, in various rounds.

In Dropbox’s case, it has a valuation of about $7.1 billion, according to recent reports. That puts it in the company of other unicorns such as Uber, which has a valuation of $68 billion, and Airbnb, which has a valuation of $30 billion.

Angels and investors

Typically, the first money a company receives is called an angel round, from wealthy individuals known as angels who put a small amount of money into the earliest stages of a company. From there, a company will often graduate to venture capital money, which is more formal financing from a partnership that organizes a fund.

Many of the most prominent venture capital companies are in Silicon Valley, where some of the fastest-growing tech companies in the U.S. are. But a number of important VCs also exist in Silicon Alley in New York.

The venture financing rounds are usually given letter names to indicate when they happen. So the first round will be called an A round. The second will be called a B round, and so on down the line. Typically, the rounds get larger as they advance.

Over the past few years, financial experts have talked about the increasing length of time it has taken unicorns to go public. These companies have received big valuations and pots of money, but often wait ten years or longer to go public, which is more than double the time it took companies to go public in 1999.

Amazon, for example,went public in 1997, just three years after its founding in 1994.

One important reason for the change, according to consultancy McKinsey & Company, is that promising young tech companies have more private capital available to them now than they did in the past.

Pricing shares

Before a company goes public, it has to set the value of its shares. It does this based on previous valuations the company has received, but also following a process called the “road show.”

The road show is when the investment bank in charge of the offering goes out to big investors to assess their interest in the stock. The price is usually determined following the roadshow, when the investment bank has a better sense how much people are willing to pay for the stock.

Dropbox’s $7.1 billion valuation is lower than the $10 billion valuation it received several years ago from private investors, which indicates Wall Street may not be willing to pay as much for the company as previous investors, according to reports.

Good to know: Dropbox’s Houston owns 25% of his company today, according to the company’s prospectus. Each time he received more venture capital money, he had to sell off part of his ownership of the company. (Venture capital company Sequoia, for example, owns about 23% of the company.) Nevertheless, considering its current valuation, Houston’s stake would be worth about $1.7 billion.

The post What Took Dropbox So Long to Go Public? We Explain What an Exit Is appeared first on Stash Learn.

Chi-Hua is a Co-Founder and Managing Partner of Goodwater Capital. He spoke with us about venture capital (VC), his personal money habits, and how his parents shaped his financial outlook.

“I was very fortunate early on in my career to have the opportunity to meet and invest in a little company called the Facebook when it was six employees and just a few hundred thousand registered users,” he said.

Facebook was one of the first companies in which he invested at the beginning of his career, when he was at a VC firm called Accel Ventures. (Raise your hand if you wish you had invested in the Facebook in the early 2000s!)

“Over a 14 year venture career now, I’ve had the chance to invest at pretty early stages in companies like Facebook, Twitter, Spotify, Waze, and Chegg – which is a textbook rental company. And also countless others which were not as successful, but from which I really learned a lot.”

Lessons for success

We wanted to figure out some of the reasons behind Chi-Hua’s success today. We asked him the number one thing his family taught him about money that he still uses today.

“My parents taught me two principles that have really guided how I see the world,” he said. “The first is frugality and the second is generosity.”

The way to look at money is not as a possession, but as something you’re responsible for stewarding effectively.

He told me about his father’s journey as an immigrant to this country, and the family’s station wagon that his father took great care of and drove to work every day for 30 years.

“They were so frugal, saving every penny so they could invest it in us, their four children […] and really prepare us for the future,” he said. “At the same time, they were incredibly generous. Whenever there was anybody in their community […] in need, they didn’t hesitate to help that person out, with money or with resources.”  

He went on to say that he views money as more than just currency, but also as an effective tool of support and care within a community.

“And I really learned from them, the way to look at money is not as a possession, but as something that you’re responsible for stewarding effectively for the benefit and the care of the people who are in your community, […]. And those two principles of frugality and generosity—are ones that, not only do I apply in my personal life, but I think can be applied very broadly into work, community, and all the interactions that you have with others.”

Looking to the future

When you think of a venture capitalist, qualities like intelligence, quick-thinking, and pragmatic analysis probably come to mind. Numbers! Bottom-line! Growth-potential! But Chi-Hua Chien has brought frugality and generosity to the venture capital world and to his personal relationship with money and the world.

In closing, we asked Chi-Hua what he hopes to teach his daughter about money.

“I’d love to teach my daughter the same thing that my parents taught me, which is generosity. The resources that we have are not our own. They are resources that we have been entrusted with, to be good stewards of, in service of others, in service of our community, in service of the people around us, in service of those who have less.”

And if Chi-Hua’s career is any indication, a mix of generosity and action can take you a long way.

The post Money Advice from a Venture Capitalist: Be Generous appeared first on Stash Learn.

If you do, congrats! You are up on the startup lingo. If you’re not in the startup and corporate world, you may not be as familiar. But we’re here to help.

Venture capital (or VC) is financing that investors provide to entrepreneurs or small businesses that they believe have high growth potential. If you’re familiar with a little company called Facebook, you should know that venture capitalists were behind the growth of that company. Facebook received several rounds of funding to help it grow. But why does a company like Facebook need VC funding? Because in order for Facebook to become Facebook, they need to put money towards marketing, acquisition, hiring new talented employees, and using advanced technologies.

There are several types of investors

Angel investors and venture capitalists are two types of investors that are common in the startup ecosystem.

An angel investor is typically a high net worth individual that is using their own funds to invest. This type of investor tends to be involved in the early stages of a company. Why? Because that’s when it’s cheap! An angel investor can invest a few hundred thousand dollars in a company, before it receives millions of dollars from venture capital firms.

An angel investor is typically a high net worth individual that is using their own funds to invest.

A venture capitalist works at a Venture Capital firm and uses a firm’s funds to invest in a company. Depending on their firm, they may be involved at any stage of a company’s funding. What matters most for them is that they want to see promising growth before investing.

Venture capitalists and angel investors are also investing in entire industries. For example, when a Venture Capitalist invested in Facebook in its early stages, they were also investing in the social media industry and its future growth. Facebook is a giant in the social media industry, but its relevance is also dependent on the growth of the social media industry as a whole. Venture Capitalists focus not just on the strength of the individual company they are investing in, but also the strength of the industry — and the role that the company will have in that industry.

Knowledge DROP

Here are some whimsical industry terms to know, and these are 100% legit:

The post Getting a Jump Start on Startup Funding: An Intro to Venture Capital appeared first on Stash Learn.