Edocs
edocs, Inc. – Case questions
3. The most important terms for edocs founder Kevin Laracey to further discuss in future negotiations will be the following: • The valuation proposed by the Venture Capital investors, a number that could easily be inflated by shopping the deal around as the venture capital market is booming. • The Board of Directors provision, as Mr. Laracey wants to make sure that in the first years of the Company he will remain CEO, and that the co-founders of edocs will be part of it as well. • The share vesting schedule, which Mr. Laracey feels represents a lack of faith by the Venture Capital Investors in them. • The Anti-dilution and Right of First Refusal which in essence binds edocs to future and larger equity participations from CRV. • The warrants issue subject to the availability of other VC investors. This clause is troublemsome for the CEO of edocs because it will cause further dilution of his his colleagues stakes in the Company.
4. As for Charles River Ventures, Mr. Guerster has essentially two main things in mind regarding the term sheet: • The board composition, because he feels that Mr. Canekeratne is not suitable to be a board member as he will bring no added value to the company, and a large board of directors is not feasible. • The warrants issue that Mr. Guerster feels is an appropriate penalty for edocs if they cannot find other investors to do the deal with.
5. edocs is searching for venture capital financing in 1998, a vibrant year for the market. Furthermore, the term sheet that was presented to them was quite investor friendly, with some strict provisions that unnecessarily burden the entrepreneurs. In short, edocs can and should negotiate some of the terms presented to them by CRV.
First of all edocs is aware that if it shopped the deal around it could get a higher valuation and the provision to include the employee share option pool in the valuation seems too onerous. An acceptable compromise between
3. The most important terms for edocs founder Kevin Laracey to further discuss in future negotiations will be the following: • The valuation proposed by the Venture Capital investors, a number that could easily be inflated by shopping the deal around as the venture capital market is booming. • The Board of Directors provision, as Mr. Laracey wants to make sure that in the first years of the Company he will remain CEO, and that the co-founders of edocs will be part of it as well. • The share vesting schedule, which Mr. Laracey feels represents a lack of faith by the Venture Capital Investors in them. • The Anti-dilution and Right of First Refusal which in essence binds edocs to future and larger equity participations from CRV. • The warrants issue subject to the availability of other VC investors. This clause is troublemsome for the CEO of edocs because it will cause further dilution of his his colleagues stakes in the Company.
4. As for Charles River Ventures, Mr. Guerster has essentially two main things in mind regarding the term sheet: • The board composition, because he feels that Mr. Canekeratne is not suitable to be a board member as he will bring no added value to the company, and a large board of directors is not feasible. • The warrants issue that Mr. Guerster feels is an appropriate penalty for edocs if they cannot find other investors to do the deal with.
5. edocs is searching for venture capital financing in 1998, a vibrant year for the market. Furthermore, the term sheet that was presented to them was quite investor friendly, with some strict provisions that unnecessarily burden the entrepreneurs. In short, edocs can and should negotiate some of the terms presented to them by CRV.
First of all edocs is aware that if it shopped the deal around it could get a higher valuation and the provision to include the employee share option pool in the valuation seems too onerous. An acceptable compromise between