Session 14: November 5, 2007

Negotiating Start-up Challenges

Quote of the Day

"I get by with a little help from my friends." ~ The Beatles

Summary

Startups need all the help they can get. Choosing your stakeholders and negotiating critical relationships with an ecosystem of partners (suppliers, distribution partners, and others) can make or break your company. More often than not startups have little leverage in their relationships, so skill and tenacity as well as personal finesse are crucial. In these two cases, we examine six short fictional vignettes based on actual stories from the "field" that highlight selected challenging issues that venture capitalists face from time to time. Although the teams will only prepare written answers to three of the six vignettes, the entire class should be prepared to discuss all six of them.

Required Readings (Policy on Required Readings.)

• Readings from the Textbooks:
• Technology Ventures (Dorf and Byers): Ch 5.3 Alliances, Ch 14 The Management of Operations; Ch 19 Presenting the Plan and Negotiating the Deal (Highlights: 5.3, 14.1, 14.3, 19.4)
• Case:
• Cases: Venture Capital Vignettes & VC Vignettes (in course reader)

Study Questions and Team Case Analysis (Policy on Case Analyses.)

• You will only prepare written analysis on three of the six vignettes and we provide the questions below.

• Powerpoint Deck with 9 slides maximum (not including introductory cover sheet.) This is the one time we will allow you to go a bit longer on the powerpoints since these are essentially three mini-cases. Devote up to three slides per vignette that we ask you to analyze. No Excel Spreadsheet is required for this assignment.

• From VC Vignettes:
  
  
  • 1. "The Product is Great But Nobody Is Buying"
    
    • Before Tom receives the phone call from Sarah Starks:
      • What resources can Tom use to help him understand why SCM's product is not selling? What should he do now Should he involve the rest of the board?
      • If there is a sales problem, what should be done about it? How can a board consensus be achieved?
    • After Tom receives the phone call from Sarah Starks:
      • Should he take this new information to the board? Should he investigate further? If he takes the information to the board, what should the board do? Fire Tuck Winters?
      
      
  • 2. "Ante Up or Fold"
    
    • Before Kenny decides to reinvest in WDL:
      • What steps should Kenny take to determine whether or not PACP should invest more money in WDL services?
      • If there is a sales probelm, what should be done about it? How can a board consensus be achieved?
    • After Kenny decides to reinvest in WDL:
      • Relative to its initial investment in WDL, at what terms should PACP invest the additional $2.5 million? How should the money be put into the company? What steps should Kenny take to insure that PACP was not putting good money after bad? How, if at all, should incentives for WDL management be structured, considering the unique circumstances of the latest financing round?
    
    
• From Venture Capital Vignettes:
  
  
  • 3. "Ponderant Technology"
    
    • What makes a good board of directors?
    • How should the issue in this case be resolved -- i.e. what is the resolution that is in the best interests of the company?
    • Given your answer to the last question, how should Dan (the CEO) best make that resolution happen?
    
    

Recommended Readings (Policy on Recommended Readings. List of readings)

• Watch the following short video clips:
• Eric Schmidt (Google) - Success Factors of Potential Partners
• Eric Schmidt (Google) - Partnerships: Google and AOL
• Joe Britt (Danger) - What To Do When Partners Demand Exclusivity