Transcript Dancing with the Wolves: The Pros and Cons of Strategic

Dancing with the
Wolves: The Pros and
Cons of Strategic
Investors
Dr. Ayal Shenhav
Eitan, Pearl, Latzer &
Cohen Zedek
June 2001
www.technoLAWgy.com
Issues for Panelists
• What are Strategic Investors
looking for?
• Is Strategic Investment done for
profit or for other reasons.
• Should companies raise capital
from Strategic Investors?
• Should Strategic Investors get a
discount compared to other
investors?
The Panelists
• Shmil Levy Sequoia Capital
(Previously at Lucent).
• Chua Boon Ping: Singapore
Telecom.
• Inka Mero: Sonera.
• Yuval Baron: Actelis.
Who is a Strategic
Investor?
• All Investors claim to be
“strategic” that is bring to the
table more than just money.
• The strategic investor is
typically a company which
manufactures, distributes or
uses a product similar to that of
the start up.
Who is a Strategic
Investor? (Cont.)
• Typically the strategic investor
enters into a OEM, distribution
or other agreement at the time
of the investment.
• Investment can be made directly
or through the VC arm of the
strategic investor.
Investments by a
Strategic Investor –
Benefits to the
Company:
• Validation of technology.
• Assistance in management,
R&D, marketing and more.
• Source of Capital.
• Assurance to Investors,
Customers and Employees.
• Increased potential for M&A
with the strategic investor .
Investments by a
Strategic Investor –Risks
to the Company:
• An Investment by one strategic
investor may shut the door on
relationships with other industry
players.
• Providing access to information
to a potential rival.
• May complicate a potential
M&A transaction with any party
but the strategic investor.
Issues that Need to be
Carefully Negotiated with
the Strategic Investor
•
•
•
•
•
•
Board Membership.
Observer Status.
Right to Information.
Preemptive Rights.
Anti Dilution Rights.
Right of First Refusal to Acquire
Company (Compare to Right of First
Notice).
• Bring Along Rights
• Maximum equity of the strategic
investor.