Will the Company
Disappoint or “dazzle” it’s
Investors?
Group 4
 Nguyen Lam Thanh Truc
 Louis Bohan
 Tsatsral Dorjsuren
 Amarzaya Nasanjargal
Introduction
 Zazzle was founded by two brothers Bobby and Jeff Beaver
in 1999.
 It is an online service that allows customers to upload
images that can be printed on T-shirts, stamps, posters,
cards, coffee mugs and a variety of other items.
 At that time, there was no dominant Internet company
servicing the kind of business. Therefore, by searching on
that website, users could choose images in library or create
a digital images and place them on Zazzle.
 This service provides a marketplace for artists, freelance
photographers, and photo hobbyists to sell their work.
Introduction
 In 2003, after 3 year of hard work and overcame the
hurdle, the business was launched, and the company
began to receive many orders.
 Zazzel's business model was very similar to Dell's. It
doesn't has inventory costs, except for the disk spaces
needed to store images and provide paper and ink.
 Customers had to pay by credit card before the order
was shipped.
Introduction
 After a year, the company was contacted by a venture capital
firm. The company offered to invest US$16,000,000.
 Pros
 Partnering with two prestigious venture capital firms would provide
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Zazzle tremendous credibility.
Grow much more quickly with the investment.
Build its infrastructure.
Expanding the firm's brand.
Larger returns are expected
 Cons
 Forced into a fast growth mode.
 Would be under pressure.
 Overhead gets bigger.
 Increasing scrutiny.
 Giving up of large part of company that they have worked hard for
four years.
Question 1
 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?
Answer 1
 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 2
 Look at 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?
Answer 2
10.2 Matching a New Venture’s Characteristics with the
Appropriate Form of Financing or Funding
Answer 2
 It is not clear from the chart that Zazzle was a candidate for
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venture capital funding.
Zazzle’s ability to print shirts and posters “on-demand” is
unique, but the idea of printing logos and images on
apparel products is hundreds of years old.
It is not clear whether Zazzle will experience high growth
and Zazzle market niche is also not clearly defined.
Finally in regard to proven management, Zazzle’s lead
entrepreneurs, Bobby and Jeff Beaver have no business
experience.
The beaver’s father, who is involved with the firm, is a
serial entrepreneur, and apparently has substantial
experience.
Question 3
Evaluate Jason Ball’s (the blogger’s) criticism of Kleiner
Perkin’s investment in Zazzle. Do you think Ball makes
some good points or do you think his argumets are offbase? Explain your answer.
Answer 3
 Stages of investment
A. Series Seed


Product design, hire a few employees, launch first product
$250k - $2million median
Series A
B.

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Product and Userbase known, create business model, increase distribution,
expand into new markets.
$3m - $7million median
Examples: Uber, Instagram
Series B
C.

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Scaling the business (expansion)
$7m to tens of millions
Example: Angry Birds $40m
Series C-Z
D.
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Grow fast, go international, acquisitions
Tens to hundreds of millions
Note: Stages of investment are arbitrary
Answer 3
$16m is TOO MUCH
$16m worthwhile
 Based on the median Series A
 Low deficits in Series Seed
investment being $3m $7million, Ball is right, $16m
is too much.
 $16m is appropriate for Series
B, startup that already has a
business model, already
tested in market
period
Zazzle’s proprietary silk
screening process
Lower cost of production
Created the customized Tshirt niche market
Potential to dominate this
niche
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Question 4
What do you think is Zazzle’s exit strategy? How will
Kliener Perkins and Sherpalo Ventures recoup their
investment?
Answer 4
Zazzle exit strategy
KP and Sherpalo Recoup $
 Hire more employees
 Target well-known
 Encourage Zazzle finding
intellectual property
wholesalers, offer them
additional royalty
opportunity
 International expansion
 Acquire related printing
companies
 Design Zazzle App for mobile
devices
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partners
IPO
Acquiring longterm contracts
with media owners
International expansion
Acquire related printing
companies
http://blog.eladgil.com/2011/03/how-funding-rounds-differ-seed-series.html