1) explain the strategic rationale behind a strategic corporate transaction;
Lovepop is in the pre-seed capital financing cycle stage: it has not yet reached the
break-even point and still it is trying to find a product-market fit. FFF (fools, family and
friends) and a very expensive loan are its main sources of financing.
Lovepop has an innovative product but needs capital to scale, improve distribution
systems and establish their business model.
Lovepop needs both financial resources and guidance.
Their actual financial situation does not allow either to manage their debts or any
further development of the business.
Additionally, the time frame during which the company must find new financial
resource is an important constrain.
(2) identify, collect, analyse and distil information from multiple sources to make
relevant and appropriate business decisions in relation to a strategic corporate
transaction;
It has been analised that their target customers are very segmented: culturally,
demographically, and geographically. Considering that Lovepop products are very
innovative and their target customers are very segmented, a high-end channel, such
as kiosks would be more appropriate than a wholesaler distribution.
This strategy will guarantee not only a higher profit compared to the wholesaler
channels but also it will allow to better manage the resistance to innovation, which is
strong in a mass market distribution.
Market research has demonstrated that consumers’ demand is looking for a broader
range of products. Another evidence to justify a margin rather than a volume strategy.
After having analysed the performance of each sales channels (online, Kiosk, Etsy
and Grommet) Lovepop investment plan aims to increase the number of kiosks. At the
moment Lovepop kiosk yearly revenue is 408k (34k monthly).
A purchase of 7 kiosks would potentially increase the yearly revenue to $2.856.000, in
the face of an investment of $140.000 (ROI = 20,4).
Operating expense are expected to increase as they will expand their staff.
(3) determine and apply strategically relevant and appropriate theories and
frameworks for a given practical strategic corporate transaction; and
Both Founder and Techstars have pros and cons. In the table below are summarised
the main differences:
Techstar - Accellerator
PROS
Provide 2 years of business in few
months
High exit rate
High exposure to many investors to raise
money: 300k even before the start of the
program
High survival rate
Potential to be part of Shank Tank
programme for further visibility
PROS
Higher principal amount
Higher conversion trigger
No diluted shares
CONS
Stocks will be diluted
Lowest conversion trigger
Lowest principal amount
Founder.org - Incubator
CONS
1-year long mentorship program
Exclusivity
(4) identify and effectively communicate the most appropriate corporate financial
course of action for a range of strategic corporate transaction scenarios.
Considering the Lovepop financing cycle stage and the consequent needs, the criteria
that are relevant to choose the better option to finance the company are:





Time to push the business
Investors visibility
No shares dilution
Quality of mentorship program
Principal amount available
In order to make the decision, it is possible to use the Multi Attributed Value Score
(MAVS) where 0 represents the worst (least preferred) and 100 the best (the most
preferred) score on an attribute.
Criteria
weight
Time
Investor visibility
No share dilution
Quality of mentorship
Principal amount available
Tot
70
70
30
50
60
280
Weight in preference
score
0,25
0,25
0,11
0,18
0,21
No
Quality of
Principal
Investors shares
mentorship amount
Time
visibility
dilution
program
available
Techstars
100
100
60
80
70
Founder.org
30
60
100
80
100
Techstars = 100 (0,25) +100 (0,25) + 60 (0,11) +80 (0,18) + 70 (0,21) = 85,70
Founder.org = 30 (0,25) + 60 (0,25) +100 (0,11) + 80 (0,18) + 100 (0,21) = 68,9
Based on the criteria selected, Techstars financing option will be the best choice. Although
the principal amount available to Lovepop is less than the one offered from Founder.org,
they have promised to help Lovepop close a seed round of $300.000 before the
accelerator program even started.
Having also the opportunity to join the Shark Tank program, is very important because
even if rejected, the granted airtime would boost the sales.