Forte

1. Evaluate the situation facing the Forte founders in April 2001 and the Private Placement Memorandum (PPM) (Appendix A) prepared to convince institutional investors to invest.

Forte is encountering a very difficult time to seek an Initial Public Offering. The market is experiencing the negative consequences of the dot com bubble bursting (Spinelli, Jr., & Adams 2012). Market indices such as the S&P, Dow Jones, and NASDAQ were declining significantly (Spinelli, Jr., & Adams 2012). The “dot bubble” which created chaos in the financial markets and directly impacted the venture capital business. Spinelli (2012) states that with IPO’s in decline and early-stage venture money being diverted to prop up existing portfolio investments, institutional investors had severely tightened their criteria as to what constituted a worthy new fund opportunity (p. 417).

Forte was also starting to experience scrutiny from investors. These investors felt that Forte was not any different than other minority led funds who were only moderately successful in the past (Spinelli, Jr., & Adams 2012). Many pension fund managers and prospective limited partners also expressed skepticism with investing in a team that was “untested” (Spinelli, Jr., & Adams 2012).

These challenges made it increasingly difficult for a new venture capital company to attract investors especially since the team members consisted of individuals that did not have extensive direct experience.

The PPM itself served as a solid basis for Forte’s pitch to lure investors. We have proposed the following tactics that Palmer and his partners should utilize when they pitch their fund to investors. Instead of focusing on specifics, we have outlined basic principles that increase the likelihood of an investor saying yes. The principles below do not ensure a positive response however, given the current economic climate they will serve Palmer and his partners well. They must attempt to utilize the...