School of Business, Management, and Accountancy

Business Administration Department

Course Code: BFINEL1X Section: FIN232

Course Ms. Mechelle D. Balboa Date: 12/15/2023
Instructor:
Names: Members:
1. Clores, Taj Mykel
2. Curray, Lara Louisa
3. Glean, Kenneth
4. Herrera, Redd Denniel
5. Tabumpama, Thricia
6. Verde, Vince Kristian

Case Study 1.1: The Growth Puzzle - Navigating the Venture Capital Cycle

Introduction:
Empress Tech is a promising tech startup founded by a group of innovative
entrepreneurs with a groundbreaking solution. The startup has garnered significant
attention for its disruptive technology, and it's now at a crucial juncture where it
needs to secure funding to fuel its growth and achieve its market potential. The
founders are considering entering the venture capital cycle to raise the necessary
capital, but they are faced with a series of strategic decisions that will impact the
trajectory of their business.

Scenario:
Empress Tech has developed a revolutionary AI-powered platform that optimizes
supply chain management for large e-commerce retailers. The platform streamlines
inventory management, demand forecasting, and order fulfillment, promising
substantial cost savings and efficiency improvements for retailers.

Case Study Questions:

Preparation and Positioning:

1. How should Empress Tech prepare for interactions with potential venture capital
investors?
- Empress Tech should thoroughly research and understand the specific
focus areas and investment criteria of potential venture capital (VC)
investors. This knowledge will enable them to tailor their pitch to align
with investors' interests.
- Develop a deep understanding of the competitive landscape and market
trends to showcase how Empress Tech stands out and addresses a
unique market need.

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2. What elements of their business plan and pitch should the founders emphasize
to make their company appealing to investors?
- Clearly articulate the problem that Empress Tech is solving and how
their AI-powered platform provides a unique and effective solution.
Emphasize the market size and potential for growth.
- Emphasize how their technology is scalable and applicable to a range of
sectors or industries. Businesses that have the potential to have a large
impact are frequently of interest to investors.

3. What challenges might arise during the due diligence process, and how can the
founders address them?
- Team Background Checks: Be prepared for investors to investigate the
backgrounds of important team members. Showcase the team's
experience and credentials while taking the initiative to resolve any
issues that may arise.
- Legal and Compliance: Verify that everything is in order in terms of legal
and compliance. A discrepancy or uncertainty during due diligence
process can cause concern.

Fundraising Strategy:
1. What factors should the founders consider when determining the amount of
capital to raise?
- There are many factors that founders should consider when wanting to
raise their capital, one of which is considering the stage of your
business. For startups, factors such as fundings on research and
development, the potential marketability of the product, the amount of
capital needed to boost the profitability of the company, the type of
investor that will align in your business, and the level of risk is involved
as the capital increases.

2. Should Empress Tech pursue a seed round, Series A, or later-stage funding,

considering their current stage of development and growth prospects?
- Given the early stage of the company, Empress Tech should pursue the
seed round funding, as the AI-powered platform is relatively new and
still undergoes monitoring, research, and development as the concept
of the product is still in question for its credibility. Thus, with the finance
that seed round funding provide on the product development, market
research, and the development of the company, this can help Empress
Tech continuous growth to be an established company.

3. What are the advantages and disadvantages of raising capital from venture
capitalists compared to other funding sources, such as angel investors or
bootstrapping?

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 - Venture capitalists have more expertise and experience in the business,
which gives more in-depth guidance to start ups business than
investors. Venture capitalists provide more access to large fundings and
have more business resources that can help startups to grow. However,
securing a venture capitalist investor is not an easy process. They can
be very demanding, time consuming, and complex. And with venture
capitalists providing large access to funds, they mostly expect a high
return of investment, therefore putting pressure on the startup business
to meet on demand.

Valuation and Equity:

1. How should the founders approach valuation negotiations with potential
investors?
- Founder should approach a potential investor by discussing to them
your start up value proposition, market potential, and final projections to
gain your investors trust that you are transparent to them. Also, by
telling them your alternatives because you are start up, so it is important
to have alternatives.

2. What are the implications of the valuation on the equity ownership of the
founders and the venture capitalists?
- The valuation of a company can has significant implications for both
the founders and venture capitalists. The valuation reflects the
perceived worth of the company, and changes in valuation can impact
various aspects of equity ownership and the overall dynamics of the
investment.

3. How can the founders strike a balance between securing sufficient capital and
maintaining an appropriate level of ownership and control?
- Founders can strike a balance by carefully negotiating with investors to
secure necessary capital while preserving a reasonable equity stake.
This involves clear communication, thorough due diligence on potential
investors, and structuring deals that align with the company's long-term
vision.

Investor Selection:
1. What criteria should Empress Tech use to evaluate and select potential venture
capital investors?
- In selecting the suitable investor for the company, the owner should
know if the potential investor is qualified or suitable in the industry
aligned with the company, having the expertise, experience, and
credibility in handling a technology-based company in terms of
technological and business aspect, and being able to share a vision with

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 the owner, where the owner and the investor can agree in their decision-
making.

2. How can the founders identify investors who align with their long-term vision and
strategic goals?
- The startup can identify whether an investor aligns with their long-term
vision and strategic goals by researching about their track record and
due diligence, ensuring the absence of any legal aberrations and ethical
concerns. In-depth meetings should be held to ask strategic questions
and clarify either party's expectations.

3. What role can investor expertise and networks play in supporting Empress
Tech’s growth beyond capital infusion?
- Aside from capital infusion, the chosen investor can supply the startup
with adequate knowledge and guidance as they are experienced within
the AI tech industry. They can give advice on the intricacies and
possible roadblocks that the startup may experience.

I. Central Problem: [The main problem that is trying to be resolved presented

in the case] (3 points)

- For Empress Tech to secure funding from venture capital investors in fueling
the growth of the company and achieve its market potential.

II. Statement of Objectives:

Must Objective: [Short term objective. It means the objective is achievable within 1
year] (2 points)

- Secure an initial round of funding within the next 12 months to support product
development and market expansion.

Want Objective: [Long term objective. It means the objective is good for more than
1 year] (3 points)

- Becoming an established technological company in providing innovative and

high-tech products, being able to expand, be recognized locally and
internationally, and have a stable flow of income and profit.

III. Recommendation: [From the 3 ACAs that you proposed, choose only one
that you think is the most possible to be done, and excellent in your own
perspective as a manager/CEO of the company]

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ACA 1 - Pursuing Partnership from Big-Time Corporations Aligned Within the
Industry

Partnering with big time corporations can help Empress Tech to acquire
investments from those companies, learn and adapt skills that can help their product,
and reach more customers. This aim is to utilize the strategy behind partnerships
with competitors to be able to put up in the market.

ADVANTAGES:

 Partnering with a well-known corporation can help boost the promotion of the
business.
 Possibility to acquire more investors in the company due to the established
partnership with that corporation.
 Acquire bigger fundings needed for the growth of the company and improvement
of the product.

DISADVANTAGES:

 Possibilities to form partnerships with big name corporations are low due to the
state of the business being relatively new.
 High demands on shares in the equity when forming a partnership with big name
corporations.
 Dispute on the control of the company, resulting to the limited and slow growth
due decision-making process being time consuming and slow paced.
 There is a risk of exploitation due to the vulnerable state of startup business,
which corporations can take advantage of.

ACA 2 - Empowering Empress Tech's Growth through Strategic Angel Investor

Funding

The infusion of capital from angel investors can provide the necessary
financial support for Empress Tech to fuel its growth initiatives, including product
development, market expansion, and operational scaling. Additionally, potential
mentorship and strategic guidance from angel investors can contribute valuable
insights, enhancing the startup's chances of success in the competitive tech
landscape.

ADVANTAGES:

 Obtaining capital from angel investors has less risk compared to taking out a
small company loan.

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 Angel investors acquire equity in exchange for their funding, thus unlike loans,
you are not obligated to repay them.
 Provides greater flexibility on negotiation for deals and agreements and offers
valuable mentorship to the business.

DISADVANTAGES:

 Angel investors may anticipate a high return on their investment, which could put
further strain on you and any employees and put pressure on the company.
 Takes up the share on equity in exchange for fundings, giving less share in
equity for the owner, which also takes up control in the decision-making of the
company.
 This is possibly unhelpful, as some Angel investors tend to focus more on their
return of investments, and some might not have experience or expertise in
business.

ACA 3 - Acquisition of Funds from Venture Capitalist Investor Interested in AI

Technology

Venture capitalists specialize in innovative startup businesses which would be

highly suitable for our case. We will utilize the services of a venture capitalist that
focuses on AI Technology.

ADVANTAGES:

 Familiarity with the nuances of funding startups with AI Tech, given their existing
knowledge will speed up the process of growing the startup.
 There is a high interest on VC firms investing in AI startups, potentially attracting
more investors to invest in the company.

DISADVANTAGES:

 The investors may question the credibility of the AI technology due to its
relatively new form of technology, which can slow downs and increase the
possibility of investors backing out from the deal.
 Investors will question the safety of data in the AI technology, that can make
investors cautious on the risk it can brought.

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IV. Detailed Plan of Action: (5 points)

KEY PERSON/S
ACTIVITY DEPARTMENT
INVOLVED
PREPARATION STAGE

Identify the target funds or

capital needed to invest in
FINANCE Finance Manager
the business, valuing the
company before investing to
venture capital.
DURATION: 2 WEEKS
Pitch Deck visualization,
preparation for the
presentation needed for the MARKETING Marketing Manager
pitching.
DURATION: 3 WEEKS
Creating an effective
business plan of the
company, planning, and
structuring the plan in FOUNDER Founder
achieving the main goal of
the company.
DURATION: 3 WEEKS
Sourcing of potential venture
capitalist investors or VC
firms interested in AI
Technology, targeting VC
FINANCE Finance Manager
firms that focuses on funding
AI-Tech startups that is
suited for the company.
DURATION: 3 WEEKS
ACQUISITION STAGE

Pitching of the company

business plan to potential MARKETING Founder, Marketing Manager
venture capitalist investors or
VC firms.
DURATION: 1 WEEK
Preparing for the Due
Diligence process, readying
legal documents needed to LEGAL Legal Counsel
present for review.
DURATION: 1 MONTH
Negotiations and review of
the deal, negotiate the
company terms and Legal Counsel, Financial
LEGAL, FINANCE
agreement, and Manager
understanding and reviewing
the contract before signing it.

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DURATION: 1 MONTH
Closing and confirmation of
deal, both the owner and the Legal Counsel, Financial
investor reaching an LEGAL, FINANCE
Manager, Founder
agreement.
DURATION: 3 DAYS
POST STAGE

Continuous development of
the AI-Tech product, RESEARCH AND Research and Development
continuously monitoring the
DEVELOPMENT Manager
performance of the AI
platform and perform needed
software updates.
DURATION: 6 MONTHS
Utilizing the funds to improve
marketing of product, seek
advice from the investor in MARKETING, Marketing Manager,
the promotion of the OPERATIONS Operations Manager
company in the market.
DURATION: 6 MONTHS

NOTE: The answer must be logical and consistent. Should there be any confusion
with the proposed answer, revise it immediately and think of the best answer that will
suffice the consensus of the members of the group.

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