Will the Company D isappoint or „dazzle” it’s Investors?

1. Will the Company Disappoint or „dazzle” it’s Investors? Team CS: EmilMA1N0211AnjaMA1N0206LubicaMA1N0212 MichalMA1N0218

2. Introduction

3. Zazzel's business model was very similar to Dell's.It had essentially no inventory costs, except for the physical disk space needed to store digital images and supply of paper and ink. Customers paid by credit card before an order was processed and shipped Introduction

4. A year or so after, the company was contacted by a venture capital firm. • Kleiner Perkins and Sherpalo offered to invest $16 million Introduction

5. In the end, Zazzle took the money, thinking that the opportunity to take the company to the next level, and opportunity to partner with two prestigious venture capital firms, was just to good to pass up. Introduction

6. So what do you think? Do you think Kleiner Perkins and Sherpalo Ventures made a wise decision investing $16 million in Zazzle? Three years from now, do you think that Zazzle will have disappointed or dazzled its investors? Why? • Wise decision (in spite of significant amount)/Dazzle its investors • The Ventures probably thought that sales will quickly grow. • They may also feel that Zazzle is a start point for the sale of customized on-demand products, and that t-shirts, stamps, and posters are only the start. • On the con side, although Zazzle says that it has proprietary technology, it’s hard to believe that what they’re doing can’t be easily copied. Question 1

7. Look at the Table 10.2 in the chapter. At the time that Zazzle raised venture capital funding, to what extent did it resemble the ideal candidate for venture capital funding as stipulated by the materials in the table? Question 2

8. Look at the Table 10.2 in the chapter. At the time that Zazzle raised venture capital funding, to what extent did it resemble the ideal candidate for venture capital funding as stipulated by the materials in the table? • Zazzle has a high leverage, a healthy balance sheet, strong cash flow and good management. • The business idea is unique at that time with high growth and a niche market. • Therefore they are qualified for venture capital funding. We would say that debt financing would be ideal. Question 2

9. Evaluate Jason Ball’s (the blogger) criticism of Kleiner Perkin’s investment in Zazzle. Do you think Ball makes some good points, or do you think his arguments are off-base? Explain your answer. „A $16 million Series A round for a T-shirt site? With all due respect to KPCB (Kleiner Perkins), because they deserve it, an investment of this size in this pace baffles me. From a London perspective, it look like they're partying like it's 1999 al over again in California.” • The blogger made good points because they invest huge amount of money in new, not so develop company. • The risk was even higher because of the fact that they invest in Internet based company which is unpredictable. Question 3

10. What do you think is Zazzle’s exit strategy? How will Kleiner Perkins and Sherpalo Ventures recoup their investment? • The two possible exit strategies: • to be acquired • to go public • If either of these options becomes a reality, Kleiner Perkins and Sherpalo Ventures will recoup their investment by liquidating their Zazzle stock. The more realistic of the options is to be acquired. Question 4

11. One of the criticisms of Zazzle is that its service is almost identical to a similar venture-backed company called Café Press’s (www.cafepress.com) Web sites. What points of differentiation , if any, do you see between Café Press and Zazzle? • The businesses are almost the same. • Zazzle offers a customer satisfaction policy and all the customer’s information is secure. Whereas “café press” does not offer this. • In addition, it seams that Zazzle has a slightly better products and designs but ther products are more expensive as well • Web site of both competitors looks almost the same ApplicationQuestion 1

12. Spend some time on Zazzle’s Web site creating a T-shirt. Did you find the site to be easy to navigate and Zazzle’s product offering appealing? What is it that you liked about the experience and what did you not like? Did your experience influence your perception of the wisdom of Kleiner Perkins’s and Sherpalo’s investment in Zazzle? • Website is easy to navigate and its product offering is appealing. • We already met that kind of service. Nowadays a lot of company offers that kind of online service (e.g. Nike). • It didn’t have a significant influence, it is questionable which values Kleiner Perkin’s and Sherpalo’s recognized in Zazzle as a future mediator of growth and which persuade tham to invest that amount of money ApplicationQuestion 2