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Hirschtick

Hirschtick. Group 5 Ben Dakhlia Srinivas Gaddam Ashish Mahashabde Jeffrey Rosenlund Sekhar Varanasi. Players. Jon Hirschtick (MIT) Founder of SolidWorks Director, Computervision Founder of Premise Inc., Axel Bichara (MIT) Vice President, Atlas Venture Co-founder of Premise Inc.,

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Hirschtick

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  1. Hirschtick Group 5 Ben Dakhlia Srinivas Gaddam Ashish Mahashabde Jeffrey Rosenlund Sekhar Varanasi

  2. Players • Jon Hirschtick (MIT) • Founder of SolidWorks • Director, Computervision • Founder of Premise Inc., • Axel Bichara (MIT) • Vice President, Atlas Venture • Co-founder of Premise Inc., • Team (SolidWorks) • Michael Payne (Co-founder of PTC) • Robert Zuffante (MIT) • Scott Harris (Former Computervision) • Venture Capital Firms • Atlas Venture (Axel) • North Bridge Venture (Rich D’Amore) • Burr, Egan, Deleague & Co. (Jon Flint)

  3. Interests • Founder • Raise money for SolidWorks and Build a CAD software company • Control and manage a software company • Build a great management team and make lots of money • Work in a fast moving work environment and get recognized • Venture Capital Firms • Grab the market opportunity • Maximize return on investment

  4. Key Decisions/Issues • Decisions • Leaving Computervision • Hiring Michael Payne, Scott Harris, Robert Zuffante • Developing a proof-of-concept • Saying ‘No’ to buyout offer • Taking help from Axel • Issues • Recruiting people and Raising capital • Market perception (“this deal will not fly”) • SolidWorks valuation

  5. Offer/Issues • Offer from Atlas • $2.5M in pre-money valuation and 15% employee stock option plan • Issues • Pre-money valuation of $2.5M is not backed by actual numbers • Our VC & DCF valuations based on conservative earning show value of $48M - 70M! • Proposed deal creates serious “control” problems • Founders only retain 30% of the company • VC’s own over 55%! share of the company • VC’s can steer company out of founder’s hands

  6. Recommendation • Pre-money valuation number should be re-negotiated, Start with a $5M valuation • Founders retain control over company functioning Proposed deal Resulting structure • Risk: VC’s may not buy-in to revised pre-valuation numbers • Workaround: Look at the alternate solution

  7. Recommendations (alternate) • Ask for less funding from VCs • Plan for round 2 of funding over next 2 years • Retains control over the company Proposed deal Resulting structure • Risk: Firm needs to be ready for asking for more funds later • Workaround: Firm is capable of sustaining itself (not in a desperate situation)

  8. Backup

  9. Facts • Need cash to sustain • 4.5 Million (3M Dev + 1M Sales & Mktg + 500K Buffer) • VC Valuation • Today’s Firm Value = 48.66 Million • DCF Valuation • Net Present Value = 70.54 Million • Offer • 2.5 Million Pre-money valuation • 15% post-money stock option pool • Market perception • The word on the street is ‘this deal will not fly’

  10. Valuation • VC Valuation • PE = 21 to 40 ~30 • Revenue = 17 Million in 1998 • Firm Value in 1998 = 17*30 = 510 Million • VC IRR = 60%, Compound IRR in 5 Years = 10.48 • Today’s Firm Value = 48.66 Million • DCF Valuation • Net Present Value = 70.54 Million

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