Edocs.Inc - 3865 Words

Duisenberg School of Finance Amsterdam 2 March 2010 | | |edocs, Inc. | | | |Entrepreneurial Finance Assignment | |Ellie Abdali |[ovu15189] | |Natalie Shriber |[0433926] | |Nikola Tadic |[ovu68532] | 1. Why does†¦show more content†¦If no other investor is convinced of the potential of the edocs business model, CRV will suffer financial damage. First of all, CRV would need to come up with an additional $2M and the news about this failed collaboration will also damage the edocs investment. Therefore, CRV will argue that it needs some measure of compensation for such damages. In addition, CRV could argue that the idea behind the syndication is to give the investment company (edocs) access to a diverse network and to provide a stronger financial syndicate. So in fact, CRV has the best interest of the portfolio company in mind. Edocs, on the other hand, will argue that CRV, based on the firm valuation, has proposed an investment amount and that CRV should also be responsible for raising the funds. There is no justifiable business reason for penalizing the founders if CRV is not successful in finding a syndicate partner. The founders would not want to bear the risk and the costs of CRV not finding a co-investor. It is not likely that edocs will accept this warrant arrangement, especially since the VC market is booming. The founders even have an offer for their company readily waiting for them back home. Guerster on the other hand will be conservative in his negotiations on behalf of CRV. First of all, Guerster is taking a huge reputational risk with this investment. Secondly, Guerster is a new