Active Involvement - When investing in
smaller companies, we'll seek opportunities to
exercise significant influence and guidance in
helping the management team build the business.
We'll maintain a close working relationship with a
company's management, adding value when needed with
product and business strategy, management team
development, operations overview, and financial
planning.
Attractive Valuation - We're aware that
substantial new capital has been committed to the
technology sector over the past few years, and as a
result there are concerns that valuations on
investments will escalate as sources of capital
compete with one another for deals. The primary
mechanism to prevent this from affecting Tera's
returns is to have varied and proprietary sources of
investment opportunities combined with a set of
objective criteria for judging investment returns.
We'll consider factors such as a company's historic
and estimated future performance as it relates to
revenues, profits, cash flow, future capital and
stock needs, industry trends and private and public
comparable equity comparisons in determining an
acceptable valuation.
Screening and Due Diligence - We've developed
a systematic process for screening and evaluating
potential investments. This process is structured to
identify the most compelling opportunities quickly,
and eliminate unattractive situations as early as
possible. Our president, Howard Sutton, typically
handles initial screenings individually, with a
focus on characteristics of management, market
dynamics and opportunity, and product attributes and
proposed terms of a deal.
The due diligence will draw upon all available
resources, both internal and external, to evaluate
the criteria which are important to the success of
the investment. This will include:
- full evaluation of the management team;
- review of market factors such as size,
growth opportunity, competition and development
trends;
- full review of proprietary technology
content;
- interviews with customers, professionals,
competitors and industry experts;
- full financial evaluation including analysis
of historical results and modeling of various
projection scenarios;
- review and evaluation of operations
including R&D, manufacturing, sales and
distribution;
- preparation of a detailed return analysis
using several cases of financial performance and
exit timing.
Structuring and Negotiating Terms - We
structure transactions as simply and
straightforwardly as possible, and negotiate openly
but firmly. We have considerable experience and
expertise in successfully negotiating and closing
transactions on favorable investor terms. Focus is
maintained on obtaining those terms relevant to
valuation and liquidity, and to protecting the
client's interests in the event of future
difficulties, rather than relying on elaborate
structures or complex financial engineering.
Leadership Role - We will, from time to time,
lead the initial round of financing in which the
Partnership is participating, financing will be made
at varying points in their development.
While we'll be able to influence and add value in
each investment, our input may vary depending on the
stage and circumstances unique to each company. Our
team can draw upon a broad range of skills and
experience in providing assistance to portfolio
companies, including:
- helping build management teams;
- assisting in the development of business and
product strategy;
- helping set and monitor priorities and
operating goals;
- planning expansion into international
markets;
- evaluating and securing strategic
partnerships;
- assisting in planning and securing
additional financing.
The Principals intend to be active members on the
board of directors and key board committees of some
portfolio companies. We expect that this process
will result in a limit on the number of investments
we make.
Investment Liquidity - Our active involvement
in portfolio companies will be important in managing
and influencing the exit strategy and timing
appropriate for each investment. We'll consider
possible exit scenarios as part of each investment
right from the initial screening. Furthermore we'll
evaluate and plan for liquidity options throughout
the investment period.