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Technology Stocks : Zitel-ZITL What's Happening
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To: M. Frank Greiffenstein who wrote (1241)11/28/1996 12:13:00 PM
From: dppl   of 18263
 
Hello Doc, when you go to an investment banker and you have a business that is already generating some revenues but no profits and you have a good business plan with partners and clients etc. and a "hot idea," proven management, a market niche and a little moat around it - you should be able to get out with 15-20% ROI per annum, over 3 years. If you are riskier then the percentage will go up. If you are very risky then the venture capitalist will be looking to double in 2 years (he may lose his shirt, too). It would be very unusual to forfeit 35% of your equity on the assumption that the investor would double in several months - which has more than happened. Even startups should do better than this if they have a "Bullet."

The point is this: either MATR was very naive about their bullet and were taken to the cleaners by ZITL, or the whole thing will come back to reality and the true value of ZITL/MATR *(as assessed by ZITL itself!)* will be assessed as ZITL @ 15 plus Matr = 18 (or so).

Why give up so much equity when you could finance at 20% if the Bullet is what it's cracked up to be. After all, if ZITL is bringing brilliance or something else to the table - those services could have been outsourced using capital at 20%.

Does this make sense?

Thomas
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