Notes from my June 15, 2016, conversation with VLDI CEO - Part 12
We then talked for a couple of minutes about the fact that for the past 500 years or so the world economy has gone through downturns every 8.5 - 10 years. In the past, those downturns have affected individual sectors or individual countries, but in this high-tech world, they are now affecting the entire world economy.
The guy that Bruce calls "XXXXXXX", has apparently been one of his investing buddies for decades. They were invested in Bear Stearns together for over 20 years. He introduced Bruce to a guy who is an engineer who apparently specializes in restructuring debt for micro-cap companies. He was apparently the architect of the deal they announced in the recent 8-K.
I had the impression that he was saying that another reason for the restructuring was to protect VLDI from the effects of a global economic downturn.
VLDI was under an NDA with MSFT regarding their LinkedIn deal. They also knew about the SAP partnership with Apple before it was announced to the world.
In response to some comments made by some I-hub posters, [...] Bruce said, "You use direct sales for reference only, you build your business through Channel Partners...Nobody in the software industry ever builds their company through direct sales to the public...You never compete with your sales force, and you never compete with your Channel Partners."
He then said that the same thing applies to the analysis of a deal, and specifically the recent debt restructuring.
He told me that the guy who held the majority of the secured debt has been investing in startups for over 30 years, with first position secured contracts, and in all those years he had never agreed to restructure a secured debt agreement into an unsecured agreement.
Bruce said that when he first approached the man, he told Bruce, "I have never done it before." Bruce responded with, "You are a man of firsts". The creditor agreed. Then Bruce said he asked him, "Do you want to just package and sell a company, which we can do now, or do you want to go for it? The worst case is that we have to back up and just sell the company. But don't you want to find out what you can get for this, what you can build? Cuz it is primed to go. You have seen the demos, you have seen the technology." The creditor said, "You are right. Sell them [apparently referring to his secured debt contracts]. Let's work it out." Bruce told me that was the condition of the deal, that they no longer have any secured debt at all.
And they are about to get rid of another $500,000 to a $million of their debt in the second round of negotiations.
The first debt negotiation was so complex it required 372 pages of underlying documents.
TPP
Answer a fool according to his folly, or he will be wise in his own eyes. (Proverbs 26:5)
