The purpose of this briefing note is to provide recommendations for Metapath Software Corp. (“Metapath”) on its financing offers received in September 1997.
These two offers came from 1) a fund consortium led by Robertson Stephens Omega Fund (“RSC”) and Technology Crossover Ventures (“TCV”) and 2) CellTech Communications (“CellTech”), a vendor of wireless technology which had recently gone IPO.
2. EXECUTIVE SUMMARY
Metapath has made good progress in developing its business since its inception – generating $6.4m revenue in the September quarter of 1997 with representation of three large customers. However, with the ambition to win a good …show more content…
In addition, CellTech’s balance sheet indicated ongoing liquidity and financing risks. As we can see from the table below, the company continued to face liquidity pressure where its cash ratio and quick ratio deteriorated over the course from 1995 to 1997. CellTech had six consecutive quarters operating loss, which indicated that its unhealthy operating cash flow ratio.
Doubts were raised whether CellTech was a good strategic fit to Metapath’s business model. This is due to the fact that CellTech’s products were mostly hardware-based and installed in the field with cellular base stations, whereas Metapath’s products largely consisted of software running on standard server platforms in the wireless switching office. The only benefit