Team CS:

Emil MA1N0211Anja MA1N0206

Lubica MA1N0212

Michal MA1N0218

*Will the Company Disappoint or „dazzle” it’s Investors?

*Introduction

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

*Introduction

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

*Introductiono 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

*Introductiono 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.

*Question 1So 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.

*Question 2Look 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?

*Question 2Look 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.

*Question 3Evaluate 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.

„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.”

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.

*Question 4What 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.

*Application Question 1One 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

*Application Question 2Spend 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