edocs, Inc. – Case questions
3. The most important terms for edocs founder Kevin Laracey to further discuss in future negotiations will be the following: • The valuation proposed by the Venture Capital investors, a number that could easily be inflated by shopping the deal around as the venture capital market is booming. • The Board of Directors provision, as Mr. Laracey wants to make sure that in the first years of the Company he will remain CEO, and that the co-founders of edocs will be part of it as well. • The share vesting schedule, which Mr. Laracey feels represents a lack of faith by the Venture Capital Investors in them. • The Anti-dilution and Right of First Refusal which in essence binds edocs to future and larger
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In order to outperform these parties edocs builds on many different key elements. First of all it offers advantages to the billing entity in the sense that it allows them to differentiate from their competitors’ “print only” offerings. From a cost perspective, edocs allows for significant savings in terms of document delivery, processing, remittance, and printing costs. Also, the service will be beneficial for the customer who receives the bills. They can push the documents to the preferred e-mail package, and bill payment will be easier and not as time-consuming. Especially, the technological and strategic partnership with CyberCash will allow for “one-click” bill payment. The main point at which edocs differs from its competitors is that edocs is offered as a software product, whereas the competitors mainly offer Internet document production and delivery as a service. The founders figured that competitors had a hard time gaining acceptance for these service-only offerings, since customers are concerned about third parties standing in between the biller and the customer. Also, the fact that Laracey, Moran, and Canekeratne had access to cheap software development personnel in Sri Lanka allowed them to differentiate themselves from their competitors, because edocs software was now developed both more quickly and cheaper than competitors could develop the software.
Edocs can also be compared to similar firms from a financial point of view. Exhibit 18-6 gives an