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Walnut Venture Asociates Deal Terms

In: Business and Management

Submitted By lalomon
Words 5092
Pages 21
Harvard Business School

9-899-097
Rev. November 19, 1998

Walnut Venture Associates (D): RBS Deal Terms
It was Friday, June 5, 1998, and Bob O’Connor was headed home for the weekend. He knew it would be a busy one, for he had many decisions to make. He had been trying to raise capital for his Company – the RBS Group, a software firm – for almost a year. He felt like he was finally nearing the end of this process, but now more issues had arisen. First, his prospective investors wanted to increase the amount of their investment. While he would be happy to have the extra money, he felt that the valuation on RBS was already lower than he had hoped, and he was reluctant to take more money at this price. Second, he had received a draft term sheet the day before. He’d only had a few minutes to scan it, but it seemed a long way from the simple deal they’d discussed weeks before. O’Connor knew he would be spending a lot of time with this document over the coming weekend.

Background
Wagner and other “angels” from the Walnut group had successfully gotten over several of the issues that had arisen during their due diligence process. (See Walnut Ventures Associates (A), (B) and (C) Nos.899-062, 063 and 064) Wagner described those issues and the due diligence process: The customer feedback was all quite good. O’Connor was a great salesman. The issue was: Is he a one man band? And we decided – yes, he was a one man band, but more by necessity than by choice. After watching him in action with his organization, we were comfortable that he could grow the organization and remain an effective leader. On the market size issue, we fundamentally decided that it was not a market with “home run” potential, but that – at the right valuation – we could still make an investment that offered attractive returns. By late January, Wagner felt that he had a “soft” commitment from the…...

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