Case Study #2

Company Profile

Company raised $95 million from venture capitalists through four rounds of financing.
The most recent financing occurred 12 months prior to Sherwood’s involvement.
Company provides Customer Relationship Management (CRM) software, requiring a heavy investment in infrastructure in order to develop a viable product. Company will need to achieve significant scale to reach profitability.
The business model has undergone significant changes in the past 18 months as the Company has reassessed its target market. The Company believed that a revised model would more effectively address the needs of potential customers.
Sales growth has been slow. Top-tier customers are testing the software but remain hesitant to make a full buying commitment due to perceived switching costs.

Sherwood Mandate

Initiate steps to reduce the monthly cash burn and, thereby extend runway.

Financial Situation

Company has $7 million in cash and had a negative cash burn of $1 million per month.
Investors stated that they would not provide additional funding unless the Company achieved key milestones in both revenue growth and debt reduction.
A term sheet from investors was not in place.

Results

Sherwood initiated a review of all trade payables to determine critical versus non-critical items and initiated cash management strategies that enabled the Company’s to meet its critical needs/requirements.
Due to prior headcount reductions, Sherwood did not recommend additional layoffs (headcount had been reduced from a peak of 185 to 45).
Sherwood negotiated forbearances relating to equipment and software leases and terminated unnecessary leases.
Termination was achieved through a combination of equipment return in addition to an affordable termination payout.
Sherwood settled non-critical trade payables at a substantial discount.
Due to the restructuring, the Company was able to reduce its monthly burn rate to less than $300,000 per month. The additional time (runway) provided for greater traction on the new business model and allowed for additional investment.

Contact

Sherwood Partners, Inc.

Silicon Valley | Los Angeles | New York

3945 Freedom Circle
Suite 560
Santa Clara, CA 95054

Phone: 650-454-8001
Fax: 650-454-8040

info@shrwood.com

 

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