Take the Money--or Run? (HBR Case Study and Commentary)

Petrolink's business plan looks like a winner. At present, the only available pipeline for operators in the Baltic Sea's newly developed Helmark gas field is owned and operated by the Russian oil and gas company Gazprom. Petrolink's founders believe that the company that opens a new pipeline should find ready customers among the field's numerous independent producers. The Petrolink team has been talking with two potential investors. After six weeks of due diligence, London Development Partners--a large, well-established venture capital firm with no experience in the gas business--offers a relatively small early round of investment without any tangible commitments to future rounds, far from what the team had hoped for. Polish venture capital firm BRX Capital has been in business fewer than five years, but it has already made investments in the Eastern European oil and gas industry. BRX agrees to the capital structure that Petrolink proposes, and to invest both the first- and second-round equity amounts. One of the start-up's main objectives has been to ensure that no one investor has too much clout, so the BRX arrangement suits them. But now that a four million eurodollar check is on the table, there's been an apparent breach of trust by the Polish VC. Petrolink's founders discover that an agreed-upon provision covering ownership dilution has been changed. Should they take BRX's money or go elsewhere? In R0411A and R0411Z, George Brenkert of Georgetown University; Sonia Lo of Chalsys Partners; William Sahlman of Harvard Business School; and Charalambos Vlachoutsicos, adviser to 7L Capital Partners Emerging Europe, comment on this fictional case.

• Going public
• Business law and ethics
• Negotiation strategies