RWI Group: Entrepreneurs FAQs #8

Companies seeking funding should submit a business plan containing complete management résumés. If entrepreneurs choose to submit executive summaries, RWI Group will contact them if there is an interest in receiving the full business plan.

Following receipt of a business plan, we review the plan to determine if there is a potential match for RWI Group. If so, we schedule a meeting, usually in our offices. The primary purpose of the meeting is to assess the experience and intangibles of the team behind the business plan.

After the initial meeting, we spend time evaluating the company and its market. As part of this process, we often contact a number of existing and prospective customers in order to help gauge market response. In addition to relying on our own experience, RWI Group maintains relationships with market experts, including CEOs and other key employees of successful technology companies. Many of these experts are RWI Group Limited Partners or are affiliated with RWI Group portfolio companies. We utilize the knowledge of these experts to help evaluate markets and opine regarding a company’s ability to achieve a sustainable, defendable competitive advantage.

We also need to be comfortable that a company’s product is unique, advantageous and defendable. To evaluate new technologies, RWI Group often complements internal know-how by accessing the opinions of appropriate experts to evaluate the technical feasibility of a company’s vision.

Entrepreneurs should supply us with several references for each founder in order to help us learn more about core team members. We contact these references and complement this list with our own references in order to avoid selection bias and ensure that a diversity of viewpoints is represented.

We examine a company’s business model with specific attention given to margins and capital intensiveness. Given the likelihood of competition, we prefer business models with relatively high gross and operating margins which are not overly capital-intensive. Companies with such profiles are best-positioned for rapid growth and permit us to achieve significant returns on our investments.

We look carefully at financial projections in order to analyze the risks and rewards associated with the company’s business. Given reasonable assumptions, we require the ability to earn a return on our investment commensurate with the level of risk assumed.

Finally we make a decision whether or not to invest in the company. If we decide to invest, we submit a term sheet for consideration. Issues such as valuation, board seat allocation, additional investment requirements, and other details are all discussed, and terms are then agreed to. We recognize that all companies and entrepreneurs are not alike so term sheets can vary depending on the specifics of a company and its team.