PunchTab Inc Case Solution

1. What is your evaluation of Punch Tab’s business? Is it an attractive investment Opportunity?

Punch Tab Inc. is a very sustainable high tech business, and it is expected to grow in size with time due to its core competencies. The company gives publishers, retailers and other application sellers an on-demand instant loyalty engagement platform. A greater part of the idea of the business has already been proved in YouSendIT. The company is expected to grow at a very high rate because the business idea is unique and there are no other significant players selling exactly the same product. Therefore, first mover advantage is expected to take the company to new levels of success and growth. Therefore, considering the success of founders of Punch Tab in the past, it’s a good opportunity for angel investors to invest in the company because the chance of success is fairly high.

2. Do you think it makes sense to do a seed round of financing? Why or why not? 

Yes, seed round of financing boosts the confidence of equity investors and lenders. Seed capital is the initial capital needed to start a business when it is the pre-revenue stage. Most of the seed capital is spent on research and development and setting up business framework. A contribution of founders of the business at that stage greatly enhances the confidence of potential investors because when they see that the founders are willing to put a lot stake in the business, the risk perceived by them must be low. Since the founders of Punch Tab needed huge amounts of initial investment, to put the business idea into practice, seed financing would make it very easy for the founders to attract angel investors and venture capital investors.