Case Study #6

Company Profile

Company has raised $53 million from venture capitalists through four rounds of financing.
The most recent financing occurred 8 months prior to Sherwood’s involvement.
Company develops products and services for wireless technologies.

Company has $8 million in cash with a monthly cash burn rate of $1 million
Company has a very clean balance sheet with no significant debt
Board communicated to the Company that it would not consider additional investment until key sales milestones were met.
Company is experiencing significant product development hurdles at a very late stage and realizes that the impending release of a new product line would be delayed by 60 days.

Identify and monetize Company assets so that the sales runway could be extended.

Company had purchased rather than leased the majority of its equipment. Sherwood arranged for the sale of approximately $2.5 million (original cost) of hardware in an auction. The equipment was transported to a region of the country where the secondary market was less inundated. As a result, the
Company realized an average sales price of 18% of the original cost.
The Company had leased equipment that was no longer critical. Under the terms of its lease, the Company possessed the right to sublease the equipment. Sherwood contacted VC’s to identify a start-up who could initiate operations with cheaper, older equipment. The start-up agreed to pay 35% of the future payment stream as it came due (original cost of $800,000).
Sherwood initiated an analysis of the Company’s patent portfolio and identified a broader set of uses for some key patents. The company was able to license the use of the patents to other companies who were competing in a tangential market. The monthly payment stream equaled $75,000.