Finance and Term Sheet Essay

Decent Essays

1) What are the most important terms for Laracey? Founders’ termination term is very important for Laracey because it increases the possibility that the unvested equity of the founders could be accelerated when the incoming CEO terminates them. It directly protects the benefits of the founders. 2) What are the most important issues for Guerster? Mergers, redemption, reorganization of the company, or transfers of control of edocs are the most important issues for Guerster. These issues will directly influence his proportionate ownership of edocs. 3) What is 'liquidation preference/participation?' Both in general, and specifically in the proposed term sheet. Compare the term sheet to M-Y: what type of security (CP, RP, …show more content…

The uncertainty of the spending on technology made the investors not willing to pay as much as Papa asked. So Papa had to revaluate and lower the price for several times. However, it is sensible that Papa realized that he should go back to the market and look for the investment. 2) What are the key differences in the term sheets offered by the insider group and Ampersand? What explains the key differences? The Venrock/BVP offer an inside round at 98.5¢ per share. The pre-money was roughly $25 million. They would share the $10 million, with Venrock taking more to increase its ownership, and leave the round open for another $5 million, getting the deal done at $15 million with an option to close as high as $18 million. Ampersand offered at $1.25 per share, and full ratchet protection for the Series B investors. The effective pre-money, with ratchets, was $32.9 million. The key difference is the offering price. Papa told Ampersand that they could only make room for them if, Ampersand gave Endeca a term sheet that offered to lead an alternate deal at a significantly higher price by the day of the board meeting. Otherwise, it would be unfair to the insiders who had been extremely supportive throughout the entire process. And the insiders had really supported when Endeca needed it. If the insiders have worked very well and shares a common vision, it also is likely to involve a very important potential customer. So Ampersand had to offer a higher price to become

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