Main issue: Should Avid seek venture debt financing?
My suggestion: Pursue on the venture debt, specifically, take the offer from Orlando Capital. To Avis Radiopharmaceuticals, taking on a venture debt primarily means to extend the runway by five (Exhibit 10) to eight months and gains more time as well as more ability to the next round of clinical trials with AV-45 and AV-133 before a Series D financing in 1Q2009. At this point, the AV-45 was finishing up the phase IIb and going to the phase III trial. AV-45 may receive a FDA’s final approval in 2Q2010 (Exhibit 7). AV-133 was going to the phase II trial and Avid would lead the industry if the trails go on successful. With the venture debt, Avid can pursue both trails simultaneously in 2009. These achievements would be critical to Avid and its venture capitalist because the successful completion of clinical trials would really add value in Avid by bringing in more IP, increasing the credit worthiness of Avid and therefore pulling up the Series D valuation, which is what exactly venture capitalists and other financing lenders want to see. Besides, Avid could use the proceeds to commit to the Easton space, cutting the operating expense in 2009 (Exhibit 8). For the venture capitalists specifically, owning most of the Avid’s shares and options (Exhibit 5), the venture debt prevents their company equity from dilution and save the equity for future financings like IPO even though the company would pay warrants to the venture debt lenders. Overall, the main purpose of using a venture debt is to achieve a higher valuation with the extra cash cushion.
Venture Debt is available largely to companies that have secured at least one round of venture capital financing by a recognized venture capital firm or syndicate of venture capital firms. The lenders are typically loaning against the creditworthiness of the venture capital firm or syndicate. Basically the lenders are betting the venture...
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