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Venture Capital Assignment




Question;Venture Capital;Assignment;Instructions;This assignment is divided into 3 parts ? A, B and C. Please answer all;questions in each part.;There is a total;of 100 points available.;The total word;limit for this assignment is 12 typed pages with 1.5 line spacing and 11 point;font size. The;word limit will;be strictly enforced. Handwritten responses will not be accepted.;Part A ? HungryPaws [40 points];Linda is an;entrepreneur who started HungryPaws, an online pet food retailer, in early;2013. HungryPaws sources dog and cat food products from 4 major manufacturers;which she stores in her warehouse in Melbourne, Australia. When a customer;places an order online, Linda ships the product from the HungryPaws warehouse;to the customer's home through a third party courier network. You are working;for Kangaroo Kapital, an Australian VC firm, and you have been approached by;Linda who is seeking series A VC funding. Until now Linda has invested $200,000;in the business from family and friends. Linda is prepared to offer you 10,000;shares in HungryPaws for $1 million in VC funding. There are currently 22,000;shares on issue.;1. Calculate the pre-money;valuation and post-money valuation for HungryPaws. What percentage ownership;will Kanagaroo Kapital gain in the company? [10 points];2. Since the business;started, Linda has taken HungryPaws through many business model iterations;starting the business as a social network for dog owners, then changing the;company into a service for making astrological predictions for pets and their;owners, and finally settling upon a pet food retail website. Since it started;selling pet food last month, HungryPaws has had 17 orders for pet food. Has the;business reached product / market fit? What should Linda's priorities be at;this stage of the company's development and why? [10 points];3. This is Linda's first;startup venture since leaving a well-paid marketing position at a major pet;food manufacturer. Although she has no prior experience with online startups;she has employed a skilled software developer as head of technology and a;qualified financial controller to run the company's accounts. Is this a good;founder and team for Kangaroo Kapital to invest alongside? Why or why not? Are;there any vital skills missing in the team? [10 points];4. Comparable businesses;have been sold on a valuation of 2x annual revenue. How much revenue will;HungryPaws need to generate in order to give Kangaroo Kapital a 5x return on;its investment? [5 points];5. Overall, is HungryPaws;an attractive investment for Kangaroo Kapital? [5 points];Part B ? Facegraph [20 points];Imagine that you;receive a call from a friend in the USA who is seeking VC funding for a new;business called Facegraph. Facegraph sees itself as the ?next big thing? in;social networking that has the potential to replace Facebook as the market;leader. Its business model is based on the idea that people are fed up with the;increasing amounts of advertising on Facebook, and will switch over to;Facegraph if they can have an ad-free experience. Although Facegraph will;initially be offered to users for free, the company believes that over time it;can introduce subscription fees of $1 per user per year. Based on the topics;discussed in the lectures, do you think Facegraph would make a good VC;investment? Why or why not? [20 points];Part C ? Menulog [40 points];Consider the;Australian company Menulog (;1. Briefly describe the;market in which Menulog is competing. Do you think this is a high growth;market? Why or why not? [10 points];2. Analyse the threat of;new entrants into this market. How high is this threat? [10 points];3. What would you see as;Menulog?s customer segments and what value proposition does Menulog provide to;them? [10 points];4. Is this a two-sided;market? If so, describe the two sides. Are there strong network effects present;in this business model? If so, describe the network effects that you see. If;not, state why not. [10 points];Note: Under no;circumstances should you contact anyone who works at Menulog.


Paper#42962 | Written in 18-Jul-2015

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