Dancing with the Wolves The Pros and Cons

  • Slides: 8
Download presentation
Dancing with the Wolves: The Pros and Cons of Strategic Investors Dr. Ayal Shenhav

Dancing with the Wolves: The Pros and Cons of Strategic Investors Dr. Ayal Shenhav Eitan, Pearl, Latzer & Cohen Zedek June 2001 www. techno. LAWgy. com

Issues for Panelists • What are Strategic Investors looking for? • Is Strategic Investment

Issues for Panelists • What are Strategic Investors looking for? • Is Strategic Investment done for profit or for other reasons. • Should companies raise capital from Strategic Investors? • Should Strategic Investors get a discount compared to other investors?

The Panelists • Shmil Levy Sequoia Capital (Previously at Lucent). • Chua Boon Ping:

The Panelists • Shmil Levy Sequoia Capital (Previously at Lucent). • Chua Boon Ping: Singapore Telecom. • Inka Mero: Sonera. • Yuval Baron: Actelis.

Who is a Strategic Investor? • All Investors claim to be “strategic” that is

Who is a Strategic Investor? • All Investors claim to be “strategic” that is bring to the table more than just money. • The strategic investor is typically a company which manufactures, distributes or uses a product similar to that of the start up.

Who is a Strategic Investor? (Cont. ) • Typically the strategic investor enters into

Who is a Strategic Investor? (Cont. ) • Typically the strategic investor enters into a OEM, distribution or other agreement at the time of the investment. • Investment can be made directly or through the VC arm of the strategic investor.

Investments by a Strategic Investor – Benefits to the Company: • Validation of technology.

Investments by a Strategic Investor – Benefits to the Company: • Validation of technology. • Assistance in management, R&D, marketing and more. • Source of Capital. • Assurance to Investors, Customers and Employees. • Increased potential for M&A with the strategic investor.

Investments by a Strategic Investor –Risks to the Company: • An Investment by one

Investments by a Strategic Investor –Risks to the Company: • An Investment by one strategic investor may shut the door on relationships with other industry players. • Providing access to information to a potential rival. • May complicate a potential M&A transaction with any party but the strategic investor.

Issues that Need to be Carefully Negotiated with the Strategic Investor • • •

Issues that Need to be Carefully Negotiated with the Strategic Investor • • • Board Membership. Observer Status. Right to Information. Preemptive Rights. Anti Dilution Rights. Right of First Refusal to Acquire Company (Compare to Right of First Notice). • Bring Along Rights • Maximum equity of the strategic investor.