Our part as entrepreneurs was to attract the venture capitals to invest in our company in order for it to grow all over the United States. The opportunity to present our product was through the pitch. That was the challenge for our group because we needed to get most of the VCs’ interest in 15 minutes overview about the company’s history, its financials over the past years, and the projections about the company’s position in the future with the investment. Because some of the VC’s might not know about our market, we had to show some graphs and indicate how much market share we have.
The main point that the VCs are looking for is whether the investment is profitable or not; and we proved to them from the financials and the graphs. Our group agreed on the post money valuation of $23. 976 million with a multiplier of 6 because of the rapid growth and we were also willing to give up 15% of our company’s ownership. After the pitch was done, four venture capitalists actually came to us and showed their interest and gave us time to think about their offers. The companies were Calypso, Glacier Bay Inc. ,
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Venture Capital group on the term sheet. What made it so interesting through the negotiations is that VC’s were competing between each other on investing their funds in our company. Vinfolio Venture Capital was the first company that approached us after the pitch with their offer that was not the best we expected. When their representative first came, he asked about the percentage of the ownership that we were willing to give up for $2 million investment. The number that we agreed on between our group members is less than 10% of the total shares.
Vinfolio agreed and also they were willing to do most of the term sheet company favorable because of the low percentage. We felt that it might be hard to get another VC to invest, so we kept the offer and tried to convince them to invest more money. However, we didn’t come to a result because they had a strategy, which was to diversify their portfolio and split the risk in different industries. We thought it might be a good idea to ask smaller amounts from different VC’s if they agree on a company favorable term sheet rather than giving a larger percentage with the whole amount needed.
But then we realized that most of the VC’s would not agree on giving up their advantages and also might increase the risk on their investment. The second company that approached us was Wildfire Venture Capital. They offered $5 million for 40% of our company’s shares and the term sheet should be investor favorable. They were pretty confident that their negotiation was the best offer that we could receive because our post money was almost $ 24 million. That didn’t make sense for us but we measured their offer and held on to it to compare it with other offers that might approach us.
We decided that the best for our company is to analyze other offers before we accept Wildfire’s offer. The next Venture Capital group that showed their interest was Calypso. They were very open and flexible in terms of the amount of investment and the percentage of ownership at the beginning. Because of that, we wanted to persuade them to invest $4 million in addition to the $2 million that Vinfolio offered to make a good $6 million to improve our product even better in the growth stage. Moreover, we agreed to keep the term sheet paragraphs in the middle of the road.
We evaluated the offers and came to a conclusion that to diversify the resources is much better than getting the money needed from one source that would let us give up 40% of the company. Unfortunately, Calypso made up their mind and decided that they want 25% on the $4 million. That created a conflict in our side with Wildfire and made it difficult to decide between the combination of two investments with company favorable and the single investment with less amount of money and higher percentage of control over the company.
Either offers didn’t satisfy our group but that was what we had until Glacier Bay Inc. Venture Capital group entered the negotiations with us. Glacier Bay impressed us with their generous offer that we didn’t expect after all the stress that we had to handle in order not to lose any offer and keep our company on the safe side. They approached us by offering $5 million for 20% ownership and middle of the road term sheet. It sounded more realistic than what Wildfire gave us before because Wildfire were looking at the numbers rather than giving the real value for the company.
Our group believed that the company offered worth more than what Wildfire offered because of what we had reached until now in sense of the ownership of the majority of the market of Coconut Water. Wildfire heard about Glacier Bay Inc. offer and tried to make a fast deal with us by offering to give $5 million for 18% share and investor favorable term sheet. We realized that we have two offers on the table, the first one didn’t appreciate the real value of our company and we believed that their aim is to take control over the company.
As soon as we got the Glacier Bay Inc. offer to invest, we gave a negative stone to Wildfire that we wouldn’t accept them unless they accept our requirements and conditions for a company favorable term sheet and less percentage ownership. While we were negotiating with Glacier Bay Inc on the term sheet, everything went smoothly and very convenient in our part of the deal. This side of the negotiation made me realizes that in order to be successful in the business world I have to be patient and do the job, and be flexible for the sake of the company’s success.