<<It is certainly possible that Noam, etc are trying to divert company resources into their own, or relative's pockets, but this inherent in every case where a partially owned start up tracking stock is used. I, for one, give MRVC's executives the benefit of the doubt, but believe that under the circumstances MRVC could not have broken into the big time without this mechanism.>>
OK, let's examine this a little more.
The way I see it is this.
Here you have a bright young man completing his studies in Optical Networking. Let's say he has a great idea for a product that he came up with on his own, and wants to start a company to pursue his idea. Say also that he has associates that share the same goals.
Forget for the moment that he is Schlomo's son.
He is in the same position as the CW engineers. He has the knowledge and ability to create a terrific product, but he is lacking a lot of things he needs (like initial funding, sales and marketing and distribution channels, access to components and software, facilities, infrastructure, etc) to bring the product to market in a timely fashion. He will have to convince someone to provide those missing ingredients, and in return he will have to give up equity in the startup.
My points are, 1) that he is going to do this anyway, with SOMEONE, so why shouldn't MRVC benefit as well, by doing the initial funding, and 2) that if Near did the research on his own, this is NOT MRVC's technology concept to begin with, it is Near's.
Of course a father wants his son to have a good start, but so what? MRVC is not GIVING (or diverting, as the technology was not theirs to begin with) away ANYTHING here - they are GETTING a great deal for themselves and us as well.
Look again at how this is structured:
$950,000 initial funding in July 1998 in return for a 19% equity position.
Warrants to buy up to 60% in 2 installments at 12 and 18 months out.
MRVC committed a tiny amount, and they got the option, (but not the committment) to buy more - they could have walked away if the prospects didn't pan out.
In between, there is a joint development effort to create a success, and if successful, look at the possible return on investment and the time. What kind of investments do YOU know about where you can risk only $950,000 up front, with a possible $2 million more, and get perhaps several HUNDRED MILLION dollars in return in say, 3 years?
The fact that Near is Shlomo's son bothers me not in the least. |
