*
*
Zazzle is an online service that allows its customers to
upload images that can be printed on T-shirts, stamps,
posters, cards, coffee mugs and a variety of other items
Customers can choose images form Zazzle's library or
create a digital images and place them on Zazzle's
website
This service provides a marketplace for artists, freelance
photographers, and photo hobbyists to sell their work
*
o 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
*
o A year or so after, the company was contacted by a venture
capital firm.
o Kleiner Perkins and Sherpalo offered to invest $16 million
Pros
•Partnering with two prestigious venture capital
firms would lend Zazzle tremendous credibility
•Grow much more quickly
•Available to build its infrastructure
•Hire more employees
•Built the firm's brand
Cons
•Forced into a fast growth mode
•Overhead gets bigger
•Larger returns are expected
•Scrutiny is increased
•Giving up of larger part of company that they
had spent four years building
*
o 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.
*
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.
*
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?
*
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.
*
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.
 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.
„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.”
*
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.
*
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
*
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