Case

Walnut Venture Associates

Angel investing has traditionally been a very popular source of financing for start-up ventures. Angel’s are high net worth individuals, who invest in and support start-up companies in early stage of growth. Walnut Venture Associates was a group of dozen or so successful entrepreneurs who came together in the summer of 1997 to form an investment group. Each of these people had made investments on their own, worked with other private investors in the past and had enjoyed working with these “value-added” added partners.

Their investment philosophy was to focus on information technology companies addressing rapidly growing markets. The companies they chose to focus on were usually located in the New England area. Members of the group had been founders of 12 companies, the CEO of more than 15 companies, had invested in over 150 private companies, and had been members of the Board of Directors of over 50 companies. Members came from diverse backgrounds and had experience in various functional areas including general management, marketing, sales, product development, technology, and finance.

Walnut believed that they added value to the companies they invested in by providing them key management support, making contacts and strategic partnerships, restructuring and recapitalization of the business, helping them raise additional financing in the future and providing overall guidance to grow the business. They felt that they were successful at this because they always looked for exceptional people with exceptional ideas and also because they always had one member of their group who was focused on the portfolio company by serving on its board but at the same time made resources and expertise of the group available to the company.

RBS Group

RBS Group Inc was a start-up that developed and marketed a software package called SOFTRAX that allowed software companies to manage their operations and financial systems. SOFTRAX was supposed to be an...