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Rssworks Inc- An Early Stage Investment Case Solution

Solution Id Length Case Author Case Publisher
917 409 Words (1 Pages) Stewart Thornhill, Tevya Rosenberg Ivey Publishing : 909M10
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Islander and Kendricks have to make a decision about their company’s funding problem. Both founders need funds for continuing and expanding their internet application based business by the name of Rank’Em. The main aim or objective of Islander and Kendricks is to get adequate financing from a VC or an angel investors to expand the company in a comfortable manner and retain maximum control over the company.

Theory suggests that there are two main sources via which entrepreneurs can finance their firms. The first source is internal financing, which is based on personal savings, family & friends, bootstrapping, and joint ventures. The second source of financing is external financing, which includes angels, VCs, corporate investors, equity markets, and banks. Both founders have exhausted their personal savings, and now they are looking for external financing source.

Rssworks Inc An Early Stage Investment Case Analysis

The first option is to get funding from angel investors, and the second option is to get money from VCs. Angel investors are established business men, and they are willing to pay Islander and Kendricks about $1 million. Canadian VCs are likely to pay them between $2 million to $5 million. On the other hand, American VC would be able to pay them $10 million, but they might demand them to move to America. These are the three option available to both entrepreneurs.   

Following table shows the distribution of funds that is required by both entrepreneurs:



Total Amount

7 Developers

1 year x 7 developers x 100000


Administrative Expenses

1 year x 1000000



1 year x 1000000



2700000 = $2.7 million

Angels’ $1 million would not suffice for the company as it requires at least $2.7 million. Canadian VCs minimal offering is $2 million, which could be bargained to $3 million approximately. Local VC would interfere in company’s operations, and both entrepreneurs might lose control over it. On the other hand, American capitalists’ offering is more than enough for the company, but the might demand them to move to America.

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