Apex Investment Partners

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1. Why does Apex find AccessLine to be an attractive investment? What are the risks?

Basically, Apex was attracted by the new technology and the unique business model of AccessLine. And, it was at the early stage and was not invested heavily by other professional investors. The positive cash flow was an important factor that makes Apex felt confident. It means that the market actually existed and customers understand the concept of technology, reducing the entry risk. With the domain knowledge in telecommunication, Apex concluded that this was an attractive investment.

When it comes to the risk of investment, the valuation of the firm was requested to be estimated at a high level. However, the market could not respond aggressively to meet the revenue forecasting or could not grow fast to meet the break even point. Both options make the investor and the investee in trouble.

2. How has AccessLine financed itself to date? Why have they chosen this strategy? What have been the implications for the firm?

In 1989, McCaw Cellular Communications invested a considerable fraction of initial capital for AccessLine. At that time, McCaw established a strategic partnership with AccessLine. After that, in 1994, the first professional equity investment was executed by AccessLine’s CFO and Morgan Stanley. The amount of fund was $15.5 million.

Our team thinks that AccessLine did not consume a lot of capital at the early stage of company. The CEO possessed the core technology under the protection of patent, reducing the initial R&D cost. On top of that, AccessLine set up many strategic partnerships so that it was able to cut a huge amount of capital investment. The capital participation of McCaw was also a good strategy. Investing in AccessLine, McCaw was actually locked in AccessLine in any aspects. From the viewpoint of AccessLine, it succeeded to acquire a big client and investor simultaneously. 3. Why does AccessLine regard Apex an attractive source of...
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