Entrepreneurial Finance and Private Equity

Class #8 – Monday, November 11, 2002

Case:    USInternetworking:  Second Round (UVA-F-1273)

 

Optional Reading: Expansion projects can also be viewed from a real options perspective.  “The Promise of Real Options,”  Aswath Damordaran, Journal of Applied Corporate Finance, Summer 2000 is a good article stressing the financial applications of real options. Expansion options are covered in “option to expand,” pp. 38-43

 

Network File:  USi(second round).xls

 

  1. Assess McCleary’s three-stage strategy for building USi?  What implications does this strategy have for the financing he will require.

 

  1. What were the pre- and post-money valuations of the firm after completion of the first round?

 

  1. Grotech Capital originally passed on the opportunity to fund USi?  What were Frank Adam’s concerns then?  How valid are these concerns in September 1998?

 

  1. Should Frank Adams agree to participate in a second round for USi?  To lead the round?  If so, at what price?

 

If you were Chris McCleary, at what price would you sell additional equity in USi?