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In spring 2001, with the venture market crashing all around, the London office of Accel Partners, a major west coast venture capital firm, needs to make a decision about investing in an Irish software company. As the first investment of the new European operation, the decision will serve as a proof of concept for the process that the organization has set up. This case presents Accel's strategy in moving into Europe and staying there even as many other firms shuttered or reduced their overseas' operations. In addition, the protagonists must decide how to structure a term sheet and whether to include another venture firm in the deal.

Spreadsheet Supplement for case 803021

Introduces the issues attendant to valuing privately held portfolios and distributing thinly traded stock. Although they have existed since the beginning of the formal venture capital industry, they have received increasing amounts of attention as the money invested in private equity has grown. Presents the perspectives of the many participants in the industry.

Spreadsheet Supplement for case 803161

A U.S. venture capital firm has just learned that the deal structure for purchasing an illiquid U.K. software firm is unacceptable to institutional investors. The group must decide if it still wants to go through with the deal. This decision hinges on whether the investors are confident that their due diligence has uncovered all the issues that affect both the price the investors will pay for the company and the additional amount they need to provide to help it recover.

Spreadsheet Supplement for case 803104

In March 2002, the five partners of Adams Capital Management (ACM), a venture capital firm investing in information technology telecommunications with $700 million under management, gathered to discuss whether they should change their strategy in view of the prolonged downturn in both the economy and their targeted investment sectors. Since its founding in 1993, ACM had followed a distinct strategy of targeting particular markets of interest, investing within these, and managing the portfolio companies through a defined process to liquidity. ACM's first fund had performed extremely well; its second was looking good; and the third, albeit only a year into its life, was not performing as well. ACM is considering three options: investing in companies producing more fundamental products, hiring more associates or investing in more markets, or taking bigger positions in companies in its traditional sectors. Each has its own possibilities and drawbacks. A rewritten version of an earlier case.

Martin Smith, a new associate at an LBO firm, must respond to a problem posed by his boss, based on an historical deal that suddenly came undone. After months of negotiation, his firm's plan to buy a bankrupt competitor of one of its portfolio companies and close it down, thus reducing capacity, was ready for board approval. Recently, not only has the market for the product improved, but management of the target firm has presented a more attractive deal to recapitalize the company. This would have disastrous results for the entire industry by perpetuating an overcapacity problem. Discusses Smith suggestions.

Mike Tarkington, a partner at Reality Venture Partners, must recommend a course of action to his colleague, Steve Bonhomme. Bonhomme is trying to decide whom he should put on the board of a company that is acquiring one of Reality's portfolio companies. Reality will own a very small portion of the merged entity, which will be headquartered in Finland, and Bonhomme is considering a host of options.

Students play the role of Steve Papa, the CEO and founder of a venture-backed enterprise software company. In the challenging financing climate of the fall of 2001, he knows that two different groups are about to submit term sheets for his company's C-round. He is trying to decide what he should aim for in the ensuing negotiation. Presents the background of the company and the lengthy battle Steve fought just to get a term sheet. He has two months of cash left and a number of issues to consider, including a founding investor's request to change the terms of a previous round.

Students play the role of Hardy Smith, one of the founding investors of a venture-backed enterprise software company. In the challenging financing climate of the fall of 2001, he is trying to decide what terms to offer the company as an insider-funded C-round. Presents the background of the company and the lengthy struggle that Hardy and the CEO endured just to get a term sheet.

Students play the role of Charlie Yie, a venture capitalist considering an investment in a venture-backed enterprise software company. In the challenging financing climate of the Fall of 2001, he is trying to decide what terms to offer the company as an outside investor leading its C-round. Presents the background of the company and the lengthy struggle that existing investors and the CEO endured just to get a term sheet.

Todd Dagres, general partner of Battery Ventures, reflects on his firm's organization and it's effectiveness in one particular deal. One of the perennial challenges of venture capital is the scaling of the firm. Usually regarded as a craft industry, venture firms tend to have fewer than ten deal-makers. Battery has undertaken a particular approach to this problem, instituting a career path that begins at a very low level, progressing to general partner. Examining Battery making a deal demonstrates the advantages and disadvantages of this structure.

The partners of a new midmarket buyout fund are working on a buyout of a closely held modular building company. Although originally structured as a stock deal, they have realized that an asset deal would be preferable from their point of view and are trying to determine what benefits it might hold for the sellers, whose continuing involvement in the company is essential for success. This case describes the process of the deal's due diligence and the state of the LBO industry in the early 21st century.

Spreadsheet Supplement for case 202090.

Steve Papa, CEO of Endeca Technologies, must decide among two term sheets raising the same amount of badly needed money for his young software company. One deal is led by insiders and, is offered at a lower price. It continues a board that has worked very well and shares a common vision. It also is likely to involve a very important potential customer. The second offer comes from a group with which Papa does not have history. Although it carries a higher price, it will change the board structure and also requires that the closing be delayed a week, from September 7, 2001, to September 14. The company has cash only into October so, if anything goes wrong, Papa is unlikely to be able to arrange alternate financing. Discusses which option he should accept.

Bo Feng, cofounder and principal in Chengwei Ventures, one of the first sovereign venture capital firms in China, is trying to decide on the proper business model for hdt, the product of a merger between two portfolio companies. This case discusses the best way for the new company, which designs Web sites and provides customer relationship management and ad-serving software, to prosper in China's changing market.

Supplements the (A) case.

Martin Smith, a recent HBS graduate, has just begun working with a leveraged buyout firm. His first assignment is to evaluate three different deals and make recommendations to the partners. As he studies the deals, he realizes that each has different merits and drawbacks and that his recommendation must take into account not only the specifics of each target company but also the situation of his firm. Also, he must consider the stage of his career and that of the senior partner.

The managers of a large corporate pension fund must decide whether to invest in a private equity fund that is offering a guaranteed rate of return of 20% on part of its portfolio. The background behind and implications of the guarantee are explored.