Endeca Technologies Essay

Executive SummaryEndeca Technologies is a softw atomic number 18 fellowship that established by Steve pappa on September 4th 2001. In the case, the corporation is currently looking for a serial C round funding to reduce the expected pre-money valuation multiple times because of the NASDAQ had fallen. In the cease, the company got a rough pre-money valuation of $25M. At this time, there are devil different confines sheets that to each one of them contains some pros and cons putting in front of popping to let him choose. Overall, tonic should choose the startle term sheet because the benefits in that term sheet are more than the second term sheet, and at the aforesaid(prenominal) time it has less cons.Does Endeca look same(p) a good enthronisation at this time?Overall, Endeca looks like a risky choice for investors to invest. Since Endeca is a technology software company, this industry is very competitive and intense everyday there are new firms emerge in this industry wi th new technologies and ideas. At the beginning, Endeca planed to authorise a serial publication C round funding in around November and Decemeber in 2000. However, because of the NASDAQ was falling, the CEO Papa realized that raising funding at that time was vey hard. Thus, Papa extended the funds from Series B to an extra six months. Papas action gave many other firms to have the chances to catch up and build up their technologies and management strategies. Thus after this six-months delay, Endeca needs to put in more campaign to gain back its market status. What are the motivations for BVP and Venrock? Ampersand?Bessemer Venture Partners and Venrock invested in the second round on Endeca. Because Papa had conjunctives with Venrock, where he had served a summer internship while at HBS. Papa and Venrock built the good relationship at that time, thus Venrock is willing to invest in Endeca, which is his motivation to invest in the firm. Ampersand is a new potentially company that w ill invest in Endeca in Series C. This is a very diversified company and so far they didnt invest in any technology company similar to Endecayet. number one, because Ampersand neer invested in any firm in this industry yet, as a diversified investing firm, they are willing to take the chance to try new thing to invest on Endeca. Secondly, Ampersand has a long-standing connection to Endecas top management team, which is also Ampersands motivation to invest in Endeca.How has the CEO handled the C round? Would you do anything different? The CEO Papa hasnt handled the Series C round fountainhead due to many different reasons. First, as mentioned before, because at that time the NASDAQ was falling, in order to avoid the pitiful investing situation and wished the market will get better again, Papa stretched the Series B investment for an extra six months. However, this turned out to be a bad decision. The fact is that the market didnt improve later and the company was having difficult to get the term sheet from investors. Secondly, even though as luck would have it Papa got two term sheets in the end, what he did wrong was that he make a communicative commitment to the insider-led and a potential client DGSCP says that one offer is better than the other one.If in the end Papa choose the other offer, he might be risky on breaking his haggling in front of DGSCP and losing business with them. If I were responsible for handling the C round, I would definitely do things differently. First of all, I would not delay the Series C round investment. I think investment funds are extremely important on doing a business it is always better to desexualize for enough funding rather than need it but cannot get the money. In addition, I would not take on the insider-led and the potential client DGSCP into the supervise to give any verbal commitment before I made my decision.Provide a detailed discussion of the pros and cons of the two term sheets. Which is more favorable t o Endeca? Evaluate the two term sheets both financially (in terms of value) and non-financially (other terms.) Which provides them with a higher probability of survival and success?First Term SheetProsConsMany investors who invested before, easier for the transitionBarely dilutes VenrockOriginal Price equals to Liquidation Preference do verbal commitment beforePotential client DGSCP involvedLower price per share, $0.985/share slight CapitalLow valuationSecond Term SheetProsConsHigher Price per share, $1.25/shareto a greater extent capitalBring in new investors, new opportunityLose Anger Series B investors and DGSCP in the C roundMore complicated because of new investorsAmpersand doesnt have much stupefy in investing this industryAccrued dividends and redemption rightsAs the chief representative for Endecas shareholders, which deal should recommend to the Board? Why?As the chief representative for Endecas shareholders, I think Papa should choose the first term sheet. According to th e analysis above, the first termsheet has more benefits everywhere the second term sheet and less cons compared to the second term sheet. The only thing I vex about the first term sheet is the capital is less than the second term sheet. However, in mankind the capital that the second term sheet provided is still far from what Papa initially wanted for Series C. Most importantly, because Papa made the verbal commitment with the potential DGSCP client that he would choose the first term sheet, consider the future cooperation and business that Papa would probably do with DGSCP, I think it is a wise choice to choose the first one at this point.