Project 4: Structuring a New Business Venture

Conference Call for New Venture with Gary and Roza

Four icons: gears, light bulb, smartphone, two people

YOU: Gary and Roza, it’s great to be working with you. I think we make a great team based

on our skill sets. Let me tell you more about the new product and how it will be

invaluable to the solar energy industry. It’s a solar energy–fueled charger that

charges a variety of products on the go, including cell phones and other electronic

devices. We need to come up with a name for it.

I showed you the prototype last month. It’s just about ready to roll, but now I just

need some time to work the kinks out. I project that it will take approximately two

years to develop this prototype for large-scale distribution, but once the product is

on the market, there is excellent growth potential. Think of how much money people

could save on electricity by using this product to recharge their cell phones and

other electronics.

However, you know that my skills are in engineering, and you probably know that

finance, marketing, and politics are not my strong suits. Also, I have to admit that I’m

not very interested in the day-to-day business operations of the company. I'd rather

spend most of my time inventing new products and would like to focus on research

and development.

Course Resource

ROZA: I think this is a great product and loved seeing the prototype in action last month,

but we're going to need additional investors and expertise to get this business off

the ground. We should develop a business plan that will be attractive to potential

investors and partners. They're going to have concerns about joining a new startup.

We should work to address these from the start. My background in marketing could

help with this, and I also have some experience in new business formation. First, we

need to choose the right legal form of business. We also need to develop our

mission statement and structure our organization to serve that mission. What do you

think are the main priorities of our new enterprise?

YOU: Last time we discussed this we identified innovation, sustainability, and timely

customer service as our top priorities. I think these are spot on.

GARY: We need to think about how we will bring in the additional skills we need to be

successful. I have decades of experience managing sales in cutting-edge technology

companies. Roza has a background in marketing, and you are our research and

development idea person. We definitely will need someone with finance skills, and

we’ll need to hire staff to handle product development, production, finance,

accounting, marketing, sales, and human resources. We should organize our business

with this in mind. My colleague, Katie Bourne, has expressed interest in working

with us, but she would need an upper five-figure salary and benefits to entice her to

leave her current position. She does not want to be an owner given her desire for

work-life balance, but she would consider joining us as an employee.

We also need a visionary CEO. Ideally, a person with connections and experience in

the solar industry. Since our last conversation, I spoke to Elijah Hecal, a forward-

thinking figure in the solar energy field, who is known for being a rainmaker. Hecal

has expressed some interest, but it will take significant incentives to get him on

board. He will want to see the potential to make a lot of money. I know some

companies use stock options to retain executives; perhaps we should look into that

possibility.

We also need to think about raising some start-up capital. I have about $100,000 I

can invest in this company. How about you guys?

ROZA: Unfortunately, at this time, I don’t have much money to invest. But I do have some

connections with a wealthy potential investor, Carmen Palombo. I’ve already talked

with her, and she thinks our product has a lot of promise. Carmen would like to play

an active role in running the business and could invest approximately $500,000 up

front. However, she would want to join the three of us as founders of the company.

She was very firm about requiring an ownership stake as well as some protection for

her own very considerable personal assets. I’ve told Carmen about our plan to start

locally, go national within a few years, and then international. She seems very

interested. I suggest we plan a dinner with the four of us in the near future. I’ll check

for available dates with Carmen and circle back to you.

GARY: Great idea, Roza. Let’s definitely plan that dinner. We’ve talked about this before,

and none of us mind sharing ownership if Carmen is willing to put that kind of

money into this business. Even if Carmen does join us, I’m still concerned that we

may not have the right level of capital and expertise to ensure our success, especially

with the growth we anticipate. We should look into getting some additional advisors

or put together a group of people to help us with large-scale management. We

should find a way of getting some advisors regularly involved in the company.

YOU: This is great! I’m really excited to be working with you both and I’m looking forward

to meeting Carmen. I agree with everything that’s been said today and will take a

stab at developing a presentation for Carmen and other investors. Let’s talk again

soon.

GARY: Bye.

ROSA: Have a great one!

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