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LLinc Case Study Of A Start Up Case Solution
The company also account for the expected number of terminals used for corporate multimedia training which is expected to grow from 50,000 in 1991 to 420,000 by 1995. The sales of these multimedia are directly linked with company’s ability to earn revenues. Similarly, desktop video conferencing is also expected to increase from 80,000 to 125,000 in 1993 and then 400,000 in 1994. The GlobaLink will require a computer system to operate. Therefore, the computer system market is linked directly. According to the InfoWorld, the computer systems for video conferencing will be increased to $3.3 billion in 1997.
Following questions are answered in this case study solution
Carry out an internal assessment of ILinc and qualitatively analyse whether is a promising company to invest in.
What are the critical assumptions that underlie the key features of ILinc’s business plan?
Discuss, with references, the likelihood of Ilinc succeeding as a new business, and whether ILinc is more likely to be successful than the average new company.
What features of ILinc’s business model allow them to create a new company with little investment?
Evaluate how useful ILinc’s financial projections are to a Venture Capitalist considering investing in the company and trying to assess what stake they would need to receive in exchange for their investment? What other information might they need?
Using information in the ILinc Case Study produce a set of cash flow forecasts for ILinc that a Venture Capitalist could use to value the company.
Using your forecasts in Q6 evaluate the terms of an offer that a Venture Capitalist should make for investing in ILinc and providing the injection of capital that it needs to fund its development.
Case Analysis for LLinc Case Study Of A Start Up
1. Carry out an internal assessment of ILinc and qualitatively analyse whether is a promising company to invest in.
The quality and scope of any business can be determined by the competencies and dedications of the team that has initiated the business. So to carry out an internal assessment of Ilinc, first of all, the team needs to be judged. Starting with Mark Bernstein, who has completed a bachelor’s degree in Economics from Union College. Before, getting admission in MBA, he has gained experience in sales and sales management for many computer related companies. Thus, his experience in sales tells a lot about his ability to manage a new software development company in an effective manner. In addition to this, working in Computer Associates International, he had the privileged to achieve the worldwide ranking of sixteenth out of 350 sales manager. This complements his sales skills.
Degerhan Usluel has bachelor’s degree in Electrical Engineering and has worked as chief designer and programmer for a circuit design system for a university. He also possesses the experience of heading software consulting firm as well. Finally, Jack Wilson joint the team who is a Ph.D. imp physics. He was renowned globally for his work in multimedia. All the team members have the exceptional skill to run a software development company which is a positive aspect for an investor to buy a stake in such company.
Moreover, Ilinc’s target market are fortune 1000 companies which mean that the big corporation with billions of revenues will be conducting business with Ilinc. The expected total market for training is approximate $45 billion. Currently, ILinc is aiming to target a portion if this market which is worth around $14 billion. That is outstanding prospects for a newly developing company. Consequently, Ilinc will prove to be a promising company to invest in.
2. What are the critical assumptions that underlie the key features of ILinc’s business plan?
Since GlobaLinc provides software environment that uses integrated technologies to combine software and systems. The aim is to create a distributed virtual class room environment that can replace the real class room interaction. There were several assumptions were formed while finalising the idea. The business plan assumes that by using their products companies will be able to create a just in time training facility which will allow the companies to minimise their cost. It was compared with inventory planning in which just in time helps reducing inventory holding cost. But the huge initial cost was ignored in the company’s business plan.
Secondly, in the business plan, it is assumed that the target market is Fortune 1000 companies and 40% of them will be converted to their technology and the revenues are assumed to grow at 80% annual rate. This assumption was somewhat exaggerating as most of the new business face reluctance by the client in their early years. As this technology require a lot of cash out flow. Therefore, most of the companies will not be able to invest in the technology.
Moreover, the company is assuming to get capital through initial public offering or acquisition by a large software corporation. The company is making this assumption on the basis that the business will grow in near future by a significant amount and extra funding will be needed by the management. The growth rate for sales is assumed to be very high. For instance, the company has an objective to exceed sales $12 million in 1997 which will be increased to $45 million in two years.
3. Discuss, with references, the likelihood of Ilinc succeeding as a new business, and whether ILinc is more likely to be successful than the average new company.
Ilinc is likely to be successful in near future because of the kind of innovative software services they are providing to the big corporations. Although, as mentioned earlier company might face some resistance from the clients because of huge one-time cost. But the benefit is clearly outweighing the cost. With the advent of more sophisticated information and communication technologies, the complete dynamics of the business are changing. Now to secure a competitive advantage in this fast pace commercial environment, the company needs to invest in innovative communication technologies.
This concept of creating a dynamic business operation is well understood by Ilinc and they are offering services that can allow companies to have a competitive edge by using a state of the art technology to train its employees. It is highly likely that the business adapt this technology very rapidly, once they witness the benefits offered by virtual training. Therefore, Ilinc could gain popularity among the business community and proves to be a successful venture.
Moreover, ILink is aiming to focus on corporate training. Because current corporate training practices, employees have to leave their duties & task, they have to travel to some training centre, providing the training material in well-defined books, and travelling back to the office. All this hassle adds to the fact that the current training process is very expensive. Ilinc is eyeing to solve this problem by providing just in time training facility. Now with their business model training will come to the employees instead of employees going to the training sites. Hence, ILink has a strong probability of getting succeeded.
4. What features of ILinc’s business model allow them to create a new company with little investment?
Currently, ILink needs approximately $250,000 to develop the software environment. GlobaLinc is the first product of the company which combines interactive media, multi-point desktop video conferencing and application sharing that can make the virtual learning experience close to the real classroom setting. Since the company does not need large office space, machinery, and vehicle to operate the business. Therefore, the amount of investment required is very minimum. Moreover, there is no need for inventory, where house and plant. The only things that the company needs to conduct its operations are reasonable office space, some employees and computer systems. The lower initial capital requirement is the major reason for the company to require little investment.
The company needs to perform the following steps to create the software which does not require a lot of cash outflows. (1) Supervising the bandwidth needs, and developing a platform for organising multi-point communication. (2) Creating models that can streamline the communication activity between students and teachers through interacting efficiently in the distributed environment. (3) Developing online platforms that will allow the experts to create content on the relevant subject and share it with the viewers. Furthermore, the experts in software developing will more focus on networking and building support instead of preparing course content. All these steps required people with relevant skills and abilities. Thus, the major cost in this business will be related to the human capital.
5. Evaluate how useful ILinc’s financial projections are to a Venture Capitalist considering investing in the company and trying to assess what stake they would need to receive in exchange for their investment? What other information might they need?
To assess and evaluate that how useful are the forecast for the investor, first the studies that company used to forecast the revenues must be studied. Company rely on the following studies to forecast the revenues from the operations.
Firstly, the Computerworld predicted that the need for multimedia corporate training in United Stated will increase from $300 million in 1992 to $1.1 billion in 1992. This was used by the company to come up with the revenue for corporate training related services. The education will also move upward by a growth rate of 51.5%. The Same trend will be followed by video conferencing which will increase by 86.2%. These growth rates are of vital importance for Ilinc because Ilinc provide provides services in all these three areas.
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