Equity Club

Issue No. 64 - April/May 2012

CASE STUDY: Not seeing eye to eye

by Karl Scott

The Situation

An Entrepreneur has taken on Angel Investment Capital and the business has been growing and developing well, BUT – that growth has meant cash flow requirements exceeded revenue and the Founder has had to go back to the Angel Well a couple of times, with associated dilution and some new strings that are not particularly palatable.

On top of that, the Angel has other issues that are putting some pressure on their resources and that is leading to pressure being applied to the Founder to prioritise things that are not in the long term best interests of the business. The prospect of dramatic dilution of the Founder or a sale under adverse circumstances is also being raised. It’s not really anyone’s fault, it is just the way things can sometimes work out when progress takes longer than people anticipated and a GFC gets in the way.

The business is fundame...

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