Analysis Paralysis
Please remember the following:
1. You will have forty-five (45 mins.) minutes to solve this case study. This will test your logical, analytical, reasoning and innovative skills.
2. All solution sheets must contain the participants’ name and college.
3. All solutions are to be submitted on the Google form provided at the end of this page.
4. Your file containing the solution should be named as-- TeamName_TeamLeader Name
5. The solution should be in Times New Roman, size 12. The file should be in PDF format only.
6. You are not expected to use any additional information. Bear in mind that this case is based on 16th August 2020. All facts and characters are purely fictional.
7. State your assumptions and justify them clearly. All calculations (if any) must be shown clearly in your solution file.
8. Please email your solutions latest by 7:00 PM. Entries after 7:00 PM shall be disqualified.
9. Any plagiarism shall be strictly penalized.
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All the best!
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When it comes to Venture Capital Firms, Xyler tops the list. The hustle and bustle of the corporate world does not hinder Xylers’ growth. Venture capitals tends to focus on emerging companies seeking substantial funds for the first time and differs from private equity which often tends to fund larger and more established companies. The company Xyler, is the brainchild of Mr. Shankar who since 2010 has left no stone unturned for the success of the company.
The financial statements of the company given below are an evidence to the same:
Spontaneity defines Mr Shankar and consequences seldom scare him. It is a venture capital firm the key element to its fund are general and limited partners and hence the board of directors are looking to acquire budding startups to grow and meet their goals. From a pool of ideas, three possible options are filtered. Even after a lot of deliberation, they are still unable to choose the best fit.
Start-Up 1
Edulite is an education service company established in 2015 which provides Experiential Education, soft skills and life skills sessions. It is located at 1st floor, SH 57, next to Indian Bank, Ramanujar Nagar, Sriperumbudur, Tamil Nadu, 602105. It has various programs and institutions in operation to impart skills of design and critical thinking like TATVA, a program which is planned to impart and inculcate communication skills, designing skills and inter and intrapersonal skills. The company is headed by a group of 5 people but has a small workforce who are mostly hired on the basis of unpaid internships. They aim to revolutionize the standard education system in the country. They train and qualify teachers and personnels who are equipped and experienced to teach required skills and knowledge. They propose to give out franchise rights to their investors to build training centres for personnel for which the structure and procedural guidelines and necessary equipment will be provided by Edulite in exchange for advance fees, royalty worth 5% of the total revenue. They claim to have tremendouss success in the past and positively affected various communities. The company claims to have an average growth of 180% for the past 5 years. But an independent audit survey proved otherwise and highlighted the lack of operations by Edulite. It has also shed light upon incidents of market manipulation. They don’t own a permanent office or location and keep shifting their location and area of service provision. They also have low customer satisfaction ratings.
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The Odysseus was founded by Mr Amit Chopra and Mr Uday Sharma in the year 2017 and the company specialises in selling battery-run automobiles. These automobiles run on self-controlled hybrid batteries for converting fuel into electricity. There are various types of DC and induction motors which are used in these models. The company was gaining a lot of attention when it first came out and earned the title of “Startup Of The Year” from the Central Government. The company was quite successful and gained a lot of attention from people all across the country since the idea was focused on sustainability. Government and the common people were understanding the importance of Sustainability and how it’s the future of our nation. The automobile models caused less pollution and reduced noise as well. The model required low-maintenance and was quite popular owing to its performance in the long run.
After gaining profits and a net worth of ₹3 Crore, Mr Chopra and Mr Sharma decided to file for an IPO in the year 2019. The company was doing quite well in the country and decided to expand its operations in countries like Sri Lanka, Vietnam, China etc.
A year after the announcement of the Union Budget where the sitting government proposed to reduce the taxation on foreign automobile companies, Mr Chopra and Mr Sharma realised the international competition they will soon face due to the prospect of Hector Motor Corp. now entering the Indian market. Next week, there came alleged news regarding Odysseus, saying that the government is proposing special allowances for homegrown companies under their Make in India campaign. The word on the street reached Mr Shankar from Xyler Corporation about Odysseus’s merger with Ajax Corp, which is a US-based automobile company. Ajax Corp is planning to acquire 40% shares of Odysseus automobile company.
Start-Up 2
Start-Up3 (Oak&Prime Investment Consultants)
Oak&Prime Investment Consultants is a startup that was incubated in 2018 by Riddhi Mehra and Ayesha Swaminathan. The company had its humble beginnings in a 200 sq. ft. office, but has become the face of Indian investors today. The firm has a track record of guaranteed profits in the stock market when one invests based on their expert opinions.
In the beginning, Oak&Prime had a rough start to its successful journey. Some even predicted, rather wished for the company’s downfall. It was difficult for the company to recruit employees who would spend nights working for the company. It was even more difficult for Oak&Prime to attract investors with the growing number of consultancies. But when you look at the company today, it’s almost as if they never went through the hard times. By 2019 the company made a profit of Rs. 75,00,000, almost threefolds of what other startups were making. Within a few months everybody wanted to work there, invest there and learn from them. But things only shine on the surface.
It was often observed that people received cold calls from Oak&Prime asking for investment in very pointed directions. While first impressions exhibited that the company’s sources always had on point predictions, some later started realising that it is actually the company that triggers the change by pushing enough people to invest in a specific way. Furthermore, people were receiving peculiar emails from a person called Rob, who consistently pushed them to invest in Oak&Prime. However, no connections were found between Rob and Oak&Prime. The company also denied sending emails of such sort. Active investors often found Oak&Prime in their range of vision, through calls, adverts and emails, without ever having registered or shown interest in the company.
You are one of the fund managers helping Mr Shankar. Your task is to choose one out of the three start-ups to acquire which will be profitable in the long run for the VC. Remember to analyse the start-ups on the basis of their operation. Loopholes are often found in start-ups so be sure to look out for them. Reason your choice of the start-up with an explanation. Also substantiate your answer with arguments for not choosing the other two.