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Walnut Deal Terms D Case

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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 …show more content…

They said they hadn’t heard from O’Connor and wanted to know what was going on. I told him that we had the $2 million pretty well pulled together. Jim said he was disappointed and that EVC wanted to be involved, and that – while they did not want an active role – he thought they could be quite helpful. EVC did have quite a few software companies in its portfolio, and it would be helpful to have a relationship with them and these portfolio companies. 2 Walnut Venture Associates (D): RBS Deal Terms 899-097 Jim said they’d like to do $750,000 and I said it was doubtful, but I would see what we could do. I called Mid-Atlantic and they agreed EVC would be a good addition, but they did not want to cut back their $1.4 million. Thus, we went to Bob and asked him how he felt about taking $2.5 million. He was not happy about the prospect of taking another $500,000 at what he believed was a low valuation * * * Thus, as the first weekend in June approached, the ball was in O’Connor’s court. Walnut and Mid-Atlantic had worked out the term sheet for their prospective investment, which they had just sent to O’Connor, and which he was studying. (see Exhibit 1) And now, the proposed investment had increased from $2.0 to 2.5 million at the same valuation. 3 899-097 Exhibit 1 Walnut Venture Associates (D): RBS Deal Terms Proposed Term Sheet JUNE

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