The Gap

1
THE GAP
Janine Canham, Partner CMS Cameron McKenna Tony
Mitchell, Director Arthur Andersen
2
Introduction
Pre - Investment
Post - Investment
Why Deals are not Win - Win
Why Deals are not Win - Win
The Gap !

• Advice for the entrepreneur
• Advice for VCs

Bridging the Gap
Bridging the Gap
Case Studies
Case Studies
Admissions from the industry !
3
Pre-Investment - Deals Fall Apart
Investee Perspective

• Other Investors
• Dilution not Agreed

4
Pre-Investment - Deals Fall Apart
Joint Factors

• Price
• Contractual Terms
• Market Conditions
• Control/Influence
• Relationship

5
Pre-Investment - Deals Fall Apart
VC Perspective

• Wrong idea
• Poor business plan
• Management ability
• Financial results inaccurate
• Projections not supported
• Unattractive ROI
• No exit route
• Title to assets
• Legal due diligence
• Corporate governance
• Management integrity

6
Bridging the Gap
Investees
VCs
Pre - Investment
VC Perspective
Investee Perspective

• Understand the business
• Due diligence
• Contractual terms
• Exclusivity
• Incentives
• Long term approach

• Good business plan
• Disclosure
• VC investment strategy
• Be prepared
• Legal documentation

7

• THE GAP

(Between speakers)
8
Post-Investment - Deals Fall Apart
Investee Perspective

• VC support lacking

Disputes - strategy/control
Joint Factors
Relationship Market/Industry Conditions Difference
/change in views on exit strategy

• Management ability
• Founders competing
• with business

• Inadequate monitoring
• Bad investment
• Business plan not followed

VC Perspective
9
Bridging the Gap
Investees
VCs
Post - Investment
Investee Perspective
VC Perspective

• Independent monitoring or oversight
• Pro-active board involvement
• Leverage network
• Non-executive board placement

• Proactive reporting to VC
• Constant communication
• Rectify deficiencies found in due diligence

10
Conclusion
Successful deals will be few

• trust
• understanding
• common purpose
• constant communication
• respect

Increase chances of success