Linda is an entrepreneur who started HungryPaws, an online pet food retailer, in early 2013. HungryPaws  sources dog and cat food...

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]