Entrepreneurial Finance and Private Equity

Class #5 – October 29, 2002

Bridge Loans to Start Ups

Case: Xedia and Silicon Valley Bank (9-298-119)

Network File: none

1. Is the Silicon Valley Bank strategy appropriate for these types of risks?

2. Should Xedia be seeking financing from SBV? Does it make sense? What are the risks?

3. How would Xedia’s venture capital investors feel about the bridge loan?

4. Is the loan to Xedia in the best interest of SBV?

5. What is an appropriate interest rate to charge Xedia? Why?

6. Should the loan include warrants? Stronger covenants?