Prepare: Apex Investment Partners (A): April 1995 9-296-028
Read: How Venture Capitalists Evaluate Potential Venture Opportunities 9-805-019
AccessLine Technologies is a telecommunication company that has already raised funds from other investors at a high valuation. It is now seeking $16 million in Round B financing. Apex Investment Partners is a venture capital firm leading this financing round. One major area of discrepancy is the valuation for AccessLine.
Using a memorandum format, please answer the following questions. Please attach your spreadsheet analysis to your memo. Also, please ignore the warrants in the Series A term sheet.
Please consider the following questions:
a) Is AccessLine an attractive investment opportunity? Why or why not? What are the key risks associated with the investment?
b) How has AccessLine financed itself to date? Why have they chosen this strategy? What have been the implications for the firm? Why is Dan Kranzler now considering raising funds from Apex Investment Partners?
c) How attractive are the terms that AccessLine has proposed to Apex for the Series B financing? Does the deal structure adequately address the risks of the investment? What issues, if any should concern Apex?
d) Prepare a "water-fall" diagram for the proposed term sheet. How does it compare to the other term sheets that we've examined?