Business > CASE STUDY > ENTR 510 Week six written assignment_CASE STUDY META CARTA 2 (All)

ENTR 510 Week six written assignment_CASE STUDY META CARTA 2

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CASE STUDY META CARTA 2 Introduction Why has this deal attracted venture capital? After DARPA invested a grant of $500,000 in 2001 that required no repayment and created no dilution of ownership; ... then this company got off the launch-pad (during this pre-round financing.) This then attracted the interest of In-Q-Tel that provided capital ($1,000,000 with other private Angels in 2002 during the Series A round) which meant that this operation had been vetted at the highest level of due diligence-since In-Q-Tel is a venture arm of the CIA. With these significant sponsor’s; the company could concentrate on product development and growth in its customers with more focus. The series B proposed round matches the companies need to relieve its cash burn cycle with the firm of Sevin Rosen and its syndicate of 3 other Venture Capital firms. The pre-money valuation is $6,500,000 and Sevin is matching that valuation with the amount of new capital to be invested. The terms call for 50% of the equity be given to Sevin and its syndicate while reducing the equity of the prior angels and founders. This is a classic “equity squeeze” that VC’s are famous for in decade’s past. Basically, the intrinsic value of the firm along with the equity extraction almost gives the VC’s control. It might be no problem buying 1% from past Angels to gain a controlling interest that might be a huge issue for the founders. The founders could then be fired or have “bosses” assigned to them. This issue of being close to control is a very attractive situation for the VC [Show More]

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