OptiGuard, Inc.: Series A-Round Term Sheet Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

OptiGuard, Inc.: Series A-Round Term Sheet Case Study Solution

The value of the investors’ return of is calculated by using the percentage held for each investor provided in the Exhibit 5. The percentage held of each investor is multiplied with the amount that the company would raise in the Series B funding round and added into the raised amount to get the lump sum amount that the company would pay to its investors. Due to the higher investment; the investors tend to demand higher return. The calculation of the return to the investors in case of raising the series B finding round, is provided in Appendix B.

Suppose you were Mannix. Prepare a document to argue for a higher valuation.

The OptiGuard intended to cost the cost of breaching data, due to which the WVP offered the Series A term sheet, which could be the fair option for creating the enough cash on hand for forthcoming months to pay off the debtobligations, without any interruptions and delays. There are various benefits of the offer,such as animmediate availability of the cash, but it would tend to reduce the overall valuation of the business as compared to other early-round investments. In addition to this, the offer of the WVP is not optimal in a way that it forgoes the tax incentives, because on the payment of dividend to stockholders; the company would have to make payment of the tax on income as the dividend payment is the part of the stockholder’s equity and the tax incentives could be claimed on the comprehensive items of income.

On the ground of the lower valuation of WPV offer; the valuation of the company seems lower, due to which the company has strong foundation of rejecting the offer or demanding the higher valuation. Additionally, the company also has an availability of different options, which could be used for the high valuation, such as: debt financing from the financial institutions that the company would repay after the completion of the life of project. As such, the debt financing would also help the company in saving the overall value, due to the fact that it would potentially dilute the effects of the future financing on Mannix and his employees’incentives for the purpose of assessing and evaluating that their efforts are rewarded adequately. Additionally, the company could take debt from the financial institutions when needed, by availing the line of credit options in order to fulfil the requirements of the working capital.

Conclusion

Series A Term Sheet was offered by Woodland Venture Partners (WVP) to OptiGuard, which has been operating in the cyber security industry.The company has been contemplating to raise the first round of venture financing in November 2015 (previous have been raised in September 2015) due to the short running of funds.The entrepreneur is again attempting to raise funds of around 50 million dollarsfrom VCs. .

The returns to investors in the Series A financing is lower than return in the Series B financing,on the basis of the higher amount of investment in series B financing. Despite of the various benefits of the offer, such as: immediate availability of the cash, it would lead to the lower valuation of the company as compared to other early-round investments, due to which the company could opt for the debt financing, which would save the overall value of the company...............................

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