Vita Coco Beverage Company

Eager to attract venture capitalists to the negotiating table, our group decided the pitch could be an instrumental step to realizing this mission. The main challenge of the pitch was how to demonstrate a strong reputation of our company, its product and financials, while gaining our desired growth advantage. This challenge was triggered by the fact that there were other companies presenting. This forced us to deliver a pitch that was attractive enough for wining many venture capitalists as such could secure us option flexibility during negotiation.

After presenting our pitch, four companies approached has for an investment negotiation, namely; Vinfolio, Calypso, Wildfire and Glacier Bay Inc. bearing in mind of the need to qualify the financial worthy of our company during the negotiation, we agreed to set worthy of Vita Coco at $23. 976 million and its EBITDA at $3. 396 million and a factor of 6 based on the high net income growth rate our company was witnessing. We engaged Vinfolio Company in the first round of the negotiation. The company had an initial proposal of investing $2 million with our company, an amount which could only allow them to own less than ten percent of our company.

However, since we were out to search for $6 million, we continued with our search for another company which could invest the remaining $4 million with Vita Coco. Shortly before we engaged another company one of our members suggested that we should consider splitting the investment values into smaller amounts. This was based on the reasoning that such a move could increase the number of investor, while mitigating chances of providing one investor a favorable term sheet. The exit of Vinfolio Company from the negotiation table gave way for Wildlife Company.

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Wildlife came with a proposal that we allow them to own 40% of our company by investing an amount worthy $5 million. They also demanded that we allow them to have an investor favorable term sheet. Their demands we too high, so we engaged them in a negotiation for the reduction of the ownership percentage. They argued to reduce the ownership and the liquidation shares dictate. However, they were too rigid with their proposed number. At this point, we requested them to put the offer on the table and give us some time to discuss the issue.

Although the figure they had proposed was not appeasing to us, it was no doubt better than the one by Vinfolio Company. After Wildlife, we were approached by Calypso who wanted us to tell them the amount we could accept from them as an investment to own a significant part of our company. Due to this reason, we decided to request them for $4 million, an amount which could be enough if combined with the offer by Vinfolio. In the process of trying to strike a balance Calypso however, they started claiming that our company financial worth values was too high. They proposed that we guarantee them 25% ownership of the company.

although we were convinced that both Calypso and Vinfolio were asking too much share ownership our company we decided to consider the two as the offer could total the $6 million we need, while they will only be owning 30% of the company. On the contrary, after finishing negotiating with Calypso, Wildlife came to us offering $5 million and demanding only 22% ownership of our company. This percentage of ownership they were too low compared to their initial demand for 4%. Despite their good however, Wildlife were still holding that they should have the investor favorable on the term sheet.

We tried to negotiate with them to allow us add some few companies favorable on the term sheet but they could not listen. At last they told us that if we wanted to take their 5%, we should make no alteration to their demands. According to my critical analysis of the behavior of Wildlife, I concluded that they might have suspected that we had overvalued our company. We lastly had the chance to negotiate with Glacier Bay Inc. for this company; they were offering us $5 million for owning only 20% of our company. On the issue of term sheet, they requested a middle of the road term sheet.

Due to this reason, we all believed that Glacier Bay Inc was offering more worth to us compared to Wildlife. However, Wildlife returned a third time offering $5 million for 18% ownership, but exclusive investor favorable term sheet. Since we did not want the idea of investor favorable term sheet by Wildlife, we opted to go for Glacier Bay Inc and Calypso as our new investors. Indeed, this negotiation made me acknowledge that patience, flexibility and interest for your company is the only way to conduct a successful business negotiation.

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