Strategy for Venture Capitals

Topics: Discounted cash flow, Cash flow, Corporate finance Pages: 1 (250 words) Published: August 18, 2011

Walnut Venture Associates:
The fact that Walnut is willing to offer $2.5 million, $.5 million more than what RBS is seeking suggests that Walnut is taking advantage of the situation by under valuing the company. •The current and future cash flow suggests robust financial standing of RBS. Although Walnut may not have a home run with the deal, it will be more than adequately compensated on its investment in near future. •Too much is riding on one man at RBS. There is no guarantee how would RBS perform without Bob O’Connor.

Current financial position suggests that RBS is already doing good with net positive cash flow. •They are seeking additional funding to expand their sale force so as to compound their revenue in near future. •O’Connor is right in thinking that Walnut is valuing his company lower. •Stringent control on the conversion of preferred stocks to common stock, heavily favoring new owners in case deal goes through.

Show here the PV of the future cash flows:

Walnut Venture Associates:
To pull the deal Walnut needs to up tick its offer, may be in the range of $6.5 to $ 7 million.

RBS should not haste to seal the deal. It should look for other options. •It should put his proposal to augment the valuation to $6.5-$7 million range.

Two VC firms joining. But by making MAVF majority share, the issue is that it is going against WVA’s business model.
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