Trendsetters Inc
| TRENDSETTERS INC. Term sheet Negotiations | Entrepreneurship and Venture Capital | | |
Introduction:
Trendsetter Inc. was formed by Wendy Borg and Jason Kushdog, the CEO and the COO respectively, in March 2000, to deliver innovative warehouse and distribution management software program for clothing retailers. The “founders” started the firm after quitting their respective jobs and decided to pool in their savings in the firm. The software produced by the firm would contain a demand forecasting module that would be capable of performing tasks for the fashion industry with the same impact that the spreadsheet had done for accounting. Initially the firm started out its operations with the savings of both the owners, but each of them knew that they would not last very long with limited capital at their disposal. The software would require a lot of money to develop and they also knew that they would need a partner in the development stage. At this point, they knew that they had to approach Venture Capitalists that would be willing to believe in the potential of their product and invest in their firm. They had approached a few firms through high level contacts established in their previous jobs. After making as many as 7 presentations, they received 2 offers from the firms that they most wanted, Alpha Ventures and mega Funds. There was just one small hindrance though, neither of them had any experience in dealing and evaluating offers from venture Capitalist firms. Alpha, although interested, were skeptical of the firm’s ability to get a five star client like Waldo, on board at an early stage. As a result, they valued them lesser than other Venture Capitalists as they were not convinced of their ability to generate $500,000 in revenues in the first year of operations. One thing that both the owners of the firm knew was that even though the initial valuation of both the VCs was not very different, they would need to be careful in analyzing the term
Introduction:
Trendsetter Inc. was formed by Wendy Borg and Jason Kushdog, the CEO and the COO respectively, in March 2000, to deliver innovative warehouse and distribution management software program for clothing retailers. The “founders” started the firm after quitting their respective jobs and decided to pool in their savings in the firm. The software produced by the firm would contain a demand forecasting module that would be capable of performing tasks for the fashion industry with the same impact that the spreadsheet had done for accounting. Initially the firm started out its operations with the savings of both the owners, but each of them knew that they would not last very long with limited capital at their disposal. The software would require a lot of money to develop and they also knew that they would need a partner in the development stage. At this point, they knew that they had to approach Venture Capitalists that would be willing to believe in the potential of their product and invest in their firm. They had approached a few firms through high level contacts established in their previous jobs. After making as many as 7 presentations, they received 2 offers from the firms that they most wanted, Alpha Ventures and mega Funds. There was just one small hindrance though, neither of them had any experience in dealing and evaluating offers from venture Capitalist firms. Alpha, although interested, were skeptical of the firm’s ability to get a five star client like Waldo, on board at an early stage. As a result, they valued them lesser than other Venture Capitalists as they were not convinced of their ability to generate $500,000 in revenues in the first year of operations. One thing that both the owners of the firm knew was that even though the initial valuation of both the VCs was not very different, they would need to be careful in analyzing the term