Entreprenuership Final

1 CoreTeck CoreTeck Inc. Case Study. Study.

Capital venture case study

Names

Institution affiliation

2 CoreTeck Inc. Case Study.

CoreTeck Inc. case study.

CoreTeck is a company formed in 1994 by Parviz Tayebati, a former Program anager of optical computing tec!nologies at "oster#iller, Inc$ T!e company %as focused on developing tunable p!otonic solutions for long !aul and metropolitan dense %avelengt! division multiple&ing '()(* system$ Parviz %!o !ad previous e&perience in ac +uiring government grants at "oster#iller !elped t!e company %in -I. grants to support researc! and development in t!e field$ /o%ever, t!e grants %ere not enoug! to cater for t!e companies infrastructural needs and t!e company %ent a!ead and soug!t investments from a syndicate of t!ree 0C firms, led by dams Capital anagement$ T!e company received of 23m of in t!e  round seeding$ 9 mont!s later t!e company received - round seeding of 25$6 million$ In 551, t!e company %as sold at 1$76 billion to Nortel Net%orks$ T!e company founders received appro&imately t!e 758 of t!e company$ uestion 1 1. Why did the VC firms like the fact that the company had received significant government grants? Assume that this had not happened and that all the funding for the company had come from VCs. Add an earlier seed round to replace the government funds, and make an estimate of the dilution that arvi! and the founders "ould have had to take in this case if the VCs "ere to retain their I##. Appro$imately ho" much less "ould the founders have in their pockets "hen the company "as sold?

0enture capital firms provide funding to small companies t!at !ave a promising gro%t! in terms of employees and annual revenue$ T!ey fund t!ese companies at t!e kick#off period in e&c!ange for an o%ners!ip stake$ T!e capitalist take t!e risk of investing in t!e companies and !ope t!at


t!y %ill become successful$ :overnment funding also represented a ma;ority confidence in t!e pro;ect undertaken by CoreTeck ventures$ "or an investor, public confidence means easier commercialization of products and an easy transition from a private company to a public company$ T!ere are very many factors t!at venture capital firms consider %!en funding a small company$ T!e financing firms al%ays %ant to be assured t!at t!ey %ill get interest from t!e money t!ey invest %it! a company$ CoreTeck %as a %ell#establis!ed company t!at !ad s!o%n signs of e&pansion from its earlier stages$ /aving received government grants, t!is s!o%s t!at it !ad demonstrated its %ort! to t!e government$ 0enture capital firms didn

uestion $


%raft a short term sheet &no more than t"o pages' for each investment round under the ne" circumstances of (uestion 1.


)*+#T T#- )*T /0IT I2V)T-2T


2+T)>


1$ T!e provisions of t!is term s!eet assume t!at t!e Investors>


'a* )ill be issued ordinary s!ares in t!e Company and not a separate class of s!ares? and


'b* )!ere t!ere is more t!an one Investor t!ey are proposing to invest on materially, t!e same terms and be parties to t!e same term s!eet$


2on3legally 4inding T!is term s!eet is indicative only, not e&!austive and not legally binding unless specifically stated "ithin a certain paragraph $ It sets out t!e proposed key terms and

conditions upon %!ic! t!e Investors are %illing to invest in t!e Company$


1$ Issuer

$ Investor5s6

CoreTeck INC

AdamsCoreTeck Capital -anagement 7 others '@ead Investor* Inc. Case Study.

13

VC firm XXX VC firm YYY

Adams Capital Management Investor

8. $isting

VC firm ZZZ 1$ Co#founder 1 # AB+uity stake  358______________________ pre#investmentD Date:

)hareholders of

$ Co#founder  # AB+uity position  458 pre#investment

the Company and pre3investment e(uity stake

4$ The Co3

Parviz Tayebati E ot!ers

9ounders

:$ stimated

T!e investment is intended to be closed by id#Nov 551$

Closing %ate

3$ Amount of the

F( A$13 million D Adams Capital anagementD

Investment

F( A$7 millionD AVC firm XXX D F( A$7 millionD AVC firm YYY D F( A$3 millionD AVC firm ZZZ D Target 0)% ;<,<<<,<<<

=$ost3completion

AParviz TayebatiD A15D8

issued share

AGt!er Co#"oundersD A=D8

capital of the

Adams Capital anagementD A=D8

Company

A VC firm XXX D A14D8 A VC firm YYY D A14D8 A VC firm ZZZ D A3D8


HHHHHHHHHHHHHHHHHHHHHHHHHHH )igned for and on 4ehalf of CoreTeck Inc.

(ate> HHHHHHHHHHHHHHHHHHHHHH arvi! Taye4ati 9ounder

(ate> HHHHHHHHHHHHHHHHHHHHHH

uestion 7 >ive three reasons Adams Capital -anagement, the lead VC firm, "as a good fit for this opportunity.

dams capital management !ad deep kno%ledge in t!e telecommunication sector$ Investors %it! a deep kno%ledge in your preferred field of specialization could !elp in +uick decision making of t!e firm$ Per!aps t!e 0C !ad uni+ue business relations!ips t!roug!out t!eir industry relations!ips$ .egardless of t!e 0C

Investors evaluate !o% %ell#oiled t!e operations are at a 0C before investing in abstract ideas or tec!nologies t!at are !ard for t!e layman to understand$ dams capital management %as also keenly follo%ing t!e company operations t!is is deduced from t!e fact t!at t!ey took a very s!ort period in deciding to partner %it! t!e CoreTeck Inc$ It also go along to s!o% t!at t!e 0C strongly believed in t!e vision of CoreTeck Inc$ T!e dams Capital anagement Company %as founded to invest in early stage tec!nology implied companies$ CoreTeck %as a first!and company in t!e industry and need ed a lead company t!at %as going to guide it t!roug! t!e evolution process$ T!is made dams Capital anagement Company it t!e best option$ T!e company

management, it meant t!at decisions %ere made professionally and t!e company gro%t! %as guaranteed$ anagement propels every business activity$ dams Capital anagement Company being an e&perienced company %as t!e precise company for CoreTeck because it could !elp in ascending to great !eig!ts in t!e tec!nology industry since it %as its main area of proficiency$ T!e company %as %ealt!y company %it! a very %ide capital investment$ T!is meant t!at t!e company %ould be able to gratify for t!e most of t!e CoreTeck financial needs$ ince t!e company %as young in t!e industry it needed an investor %!o %ould fulfill most of its financial re+uirements$ CoreTeck %as a ne% business and did not enoug! !ave resources to e&pand t!e company$ -y !aving dams Capital anagement Company as t!e lead company meant t!at CoreTeck %ould get most of t!e resources !as it re+uired and get t!e necessary guides in development$ T!e lead company !aving enoug! resources meant a strong foundation for t!e company$

.eferences aplan, J$ $, E )arren, $ C$ '515*$ B+uity financing$ In Patterns of entrepreneurs!ip management$ /oboken, NJ> )iley$


Entreprenuership Final

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