Case Study #5

Company Profile

Company has raised $65 million from venture capitalists through four rounds of financing.
The most recent financing occurred 14 months prior to Sherwood’s involvement.
Company provides product lifecycle automation software.

Sherwood Mandate

The Board needs to clarify its ability to fund the Company without the “critical” investor.
The Board directs Sherwood to communicate the Company’s financial situation to key vendors to determine their receptiveness to a financial restructuring.
The Board wants to confirm that the Company will have some working capital to achieve key milestones if additional funds are forwarded.

Financial Situation

Company has $1.5 million in cash with a monthly cash burn rate of $800,000
Company has Accounts Payable of $4 million
Company is seeking additional funding; however preliminary feedback is not encouraging. A “critical” investor is requiring that all prior investors fund their pro-rata share or it would not participate in the next round.
The Board intends to clarify the funding situation within two weeks. If funding is unavailable, the Board intends to initiate an insolvency proceeding.

Results

Sherwood contacted key creditors to initiate settlement negotiations. Payment would be based upon available cash plus a portion of the newly invested capital.
The Company and the Board were not able to keep the funding syndicate together. Company concluded that additional fund raising efforts were not going to be successful.
Company entered into an Assignment for the Benefit of the Creditors (“ABC”) with Sherwood.
Sherwood initiated the orderly wind-down of the estate and monetized key assets.
Sherwood maintained the IP platform for two months while it finalized an asset sale with a key competitor.
Sherwood made distributions to creditors. There was no secured creditor, so unsecured creditors received 60% of their outstanding balance.

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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