E140A - Session 16

E140A - Session 16

Sources of Venture Capital

Summary

This case examines the evolution of the critical relationship between entrepreneurial teams and their venture capitalists. It also allows for discussion of the pros/cons of raising funds from traditional venture capital firms versus potential corporate partners and customers.

Guest

Scott Kriens (Chairman of Juniper)
Browse the Scott Kriens video clip collection on the Stanford Educators Corner
Check out 1440 Foundation, Scott's charitable foundation aimed at promoting authentic relationship skills

Required Reading (Policy on Required Readings.)

Case: Juniper (Purchase online). Note, please ignore any financials beyond April, 1997 in the exhibits.

Case Opening: Team #4

Browse the content and watch the videos from the "Venture Capital Teaching Guide" at Stanford's ECorner site
Review the table on sources of capital from Byers, Dorf, and Nelson Chapter 18
Watch the following video clips:

Study Questions (Policy on Study Questions.)

What does our traditional V-I-E analysis from Collins/Lazier indicate for Juniper? Why do you think it became such an attractive investment for world-class investors per Sahlman's criteria?
Evaluate Sinhu's initial fundraising strategy for Juniper. What was his criteria for selecting VC partners? What did he expect of his VCs? How did this set of criteria and expected roles change between the first and second rounds of financing? In general, consider and list several pros and cons of raising traditional venture capital.
What are the pros/cons of raising capital from potential corporate partners and customers? Attempt some research into the funding histories of other celebrated startups (please avoid finding out what Juniper did) and share some examples of success.
Should the board accept Scott's recommendation to pursue corporate investors? What are some potential challenges of structuring (implementing) such a deal? For example, should these new investors get a board seat?

Assignment

Login into the MFP Forum. Under the session assignment topic answer the following questions. For this assignment, only one submission is required per team.

After hearing the CEO's presentation at the Juniper board meeting in April of 1997 regarding the third round of investment, should the board of directors (accept/reject ... choose only one) his recommendation to aggressively pursue funding from corporate partners and customers? Why?