How is the time input in the OPM selected?
The expected time to exit utilized in the OPM represents the weighted time to exit based on two scenarios. These scenarios include the time until an "unsuccessful" liquidity event and a "successful" liquidity event.
The unsuccessful scenario is typically based on the Company's cash runway, or your expectations on the time until the next necessary financing.
The successful scenario is based on your input about the time until an IPO or successful acquisition.
We place weighting on both the unsuccessful and successful scenarios (typically placing more weighting on the unsuccessful scenario, given the nature of early-stage companies) to select a weighted time to exit.
Within the OPM, holding all other items constant, an increase in the time to exit will increase the value of the common stock. The longer the term, the more likely a high value exit occurs and the larger the potential payout to common stock.