Linda is an entrepreneur who started HungryPaws, an online pet food retailer, in early 2013. HungryPaws
sources dog and cat food products from 4 major manufacturers which she stores in her warehouse in
Melbourne, Australia. When a customer places an order online, Linda ships the product from the
HungryPaws warehouse to the customer’s home through a third party courier network.
You are working for Kangaroo Kapital, an Australian VC firm, and you have been approached by Linda who
is seeking series A VC funding. Until now Linda has invested $200,000 in the business from family and
friends.
Linda is prepared to offer you 10,000 shares in HungryPaws for $1 million in VC funding. There are currently
22,000 shares on issue.
1. Calculate the pre-money valuation and post-money valuation for HungryPaws. What percentage
ownership will Kanagaroo Kapital gain in the company? [10 points]
2. Since the business started, Linda has taken HungryPaws through many business model iterations, starting
the business as a social network for dog owners, then changing the company into a service for making
astrological predictions for pets and their owners, and finally settling upon a pet food retail website. Since it
started selling pet food last month, HungryPaws has had 17 orders for pet food. Has the business reached
product / market fit? What should Linda’s priorities be at this stage of the company’s development and
why? [10 points]
3. This is Linda’s first startup venture since leaving a well-paid marketing position at a major pet food
manufacturer. Although she has no prior experience with online startups, she has employed a skilled
software developer as head of technology and a qualified financial controller to run the company’s
accounts. Is this a good founder and team for Kangaroo Kapital to invest alongside? Why or why not? Are
there any vital skills missing in the team? [10 points]
4. Comparable businesses have been sold on a valuation of 2x annual revenue. How much revenue will
HungryPaws need to generate in order to give Kangaroo Kapital a 5x return on its investment? [5 points]
5. Overall, is HungryPaws an attractive investment for Kangaroo Kapital? [5 points]
0 comments