Hbs Venture Termsheet
1. Having in regard all the information that is given in the Case Study, what is, in your opinion, the best Investor/Partner choice for NatuRi Corporation? Is it the Angel Investor, the Strategic Investor, Waltham Partners or Westlake Partners? Please justify your answers.
We are going to discuss each investor separately before coming to our conclusion. 1. The Angel Investor
An angel investor bears extremely high risk and is usually subject to dilution from future investment rounds. Therefore he normally requires a very high return on investment. This is not so appealing to the entrepreneur.
In the case of Naturi the angel investor is willing to invest up to $1.000.000. The risk here is that the value of the firm is currently unknown so Aravind and Kartik are uncertain how much equity they have to give up. Making it plausible that they will own less than 50% of the firm, which is unfavorable. Furthermore it is very unlikely that the angel investor can provide any form of added value besides providing capital, … it is likely that he lacks expertise in this branch of work. 2. The strategic Investor
A strategic investor is an individual or firm that adds value to the money it invests with its contacts, experience, and knowledge of market thus brightening the investee's prospects for additional investment and success. In this case the strategic investor is the European food company ‘Proteon’. Proteon is interested in a permanent stake in the business in addition to the expected return-on-investment. The positive aspect is that Proteon owns an own line of natural products aimed at heart health, thus provides a huge added value considering expertise in the branch. Also Kartik and Aravind believe that Proteon is willing to take a smaller equity position than other firms. The downside is that Proteon proposed a license arrangement so that they could begin distributing Rice-Active themselves and that they are already thinking about how to buy Naturi.
We are going to discuss each investor separately before coming to our conclusion. 1. The Angel Investor
An angel investor bears extremely high risk and is usually subject to dilution from future investment rounds. Therefore he normally requires a very high return on investment. This is not so appealing to the entrepreneur.
In the case of Naturi the angel investor is willing to invest up to $1.000.000. The risk here is that the value of the firm is currently unknown so Aravind and Kartik are uncertain how much equity they have to give up. Making it plausible that they will own less than 50% of the firm, which is unfavorable. Furthermore it is very unlikely that the angel investor can provide any form of added value besides providing capital, … it is likely that he lacks expertise in this branch of work. 2. The strategic Investor
A strategic investor is an individual or firm that adds value to the money it invests with its contacts, experience, and knowledge of market thus brightening the investee's prospects for additional investment and success. In this case the strategic investor is the European food company ‘Proteon’. Proteon is interested in a permanent stake in the business in addition to the expected return-on-investment. The positive aspect is that Proteon owns an own line of natural products aimed at heart health, thus provides a huge added value considering expertise in the branch. Also Kartik and Aravind believe that Proteon is willing to take a smaller equity position than other firms. The downside is that Proteon proposed a license arrangement so that they could begin distributing Rice-Active themselves and that they are already thinking about how to buy Naturi.