Case Study Description of StartUp Capital Ventures
John Dean and Danny Lui began raising their first fund as StartUp Capital Ventures (SCV), a small venture capital firm, in 2005. Along with the four other "Managing Members" of the firm, they intended to focus investments on early stage software companies with capital-efficient business models. SCV looked for organizations with initial pre-money valuations of less than $5 million. The firm's philosophy was to target companies that already had a product or service generating revenue and that could show a reasonable likelihood of reaching near-term profitability with SCV's investment. During the fundraising process, Charlie Eubanks, an "anchor investor" for the fledgling firm, pressured the founders to devote 30% of SCV's capital to investments in China. The country was a compelling place to invest in many ways. China's GDP was growing at 10% per year, primarily driven by annual private sector growth of 20%. Tax burdens were light--there was no capital gains tax. In addition, seven times more engineering students graduated from colleges in China every year than in the United States. Yet, Dean and Lui (who was originally from Hong Kong) were also cognizant of significant drawbacks to investing in the region. Examines some of those challenges as they related to two questions the colleagues tried to answer: whether to enter that market at all; and whether to invest in Zero2IPO, a Beijing-based market research firm that tracked Mainland China private equity and venture capital markets.
Authors :: John Glynn, Peter Ziebelman, Bethany Coates
Swot Analysis of "StartUp Capital Ventures" written by John Glynn, Peter Ziebelman, Bethany Coates includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Scv's Capital facing as an external strategic factors. Some of the topics covered in StartUp Capital Ventures case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the StartUp Capital Ventures casestudy better are - – talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, technology disruption,
increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of StartUp Capital Ventures
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in StartUp Capital Ventures case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Scv's Capital, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Scv's Capital operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of StartUp Capital Ventures can be done for the following purposes –
1. Strategic planning using facts provided in StartUp Capital Ventures case study
2. Improving business portfolio management of Scv's Capital
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Scv's Capital
Strengths StartUp Capital Ventures | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Scv's Capital in StartUp Capital Ventures Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the StartUp Capital Ventures Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Sustainable margins compare to other players in Finance & Accounting industry
– StartUp Capital Ventures firm has clearly differentiated products in the market place. This has enabled Scv's Capital to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Scv's Capital to invest into research and development (R&D) and innovation.
Innovation driven organization
– Scv's Capital is one of the most innovative firm in sector. Manager in StartUp Capital Ventures Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High brand equity
– Scv's Capital has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Scv's Capital to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Scv's Capital in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Scv's Capital is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by John Glynn, Peter Ziebelman, Bethany Coates can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High switching costs
– The high switching costs that Scv's Capital has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Cross disciplinary teams
– Horizontal connected teams at the Scv's Capital are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Diverse revenue streams
– Scv's Capital is present in almost all the verticals within the industry. This has provided firm in StartUp Capital Ventures case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Strong track record of project management
– Scv's Capital is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Scv's Capital
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Scv's Capital does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of Scv's Capital in the sector have low bargaining power. StartUp Capital Ventures has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Scv's Capital to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses StartUp Capital Ventures | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of StartUp Capital Ventures are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Scv's Capital is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study StartUp Capital Ventures can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– After analyzing the HBR case study StartUp Capital Ventures, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Interest costs
– Compare to the competition, Scv's Capital has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study StartUp Capital Ventures, in the dynamic environment Scv's Capital has struggled to respond to the nimble upstart competition. Scv's Capital has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the segment, Scv's Capital needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Skills based hiring
– The stress on hiring functional specialists at Scv's Capital has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Scv's Capital supply chain. Even after few cautionary changes mentioned in the HBR case study - StartUp Capital Ventures, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Scv's Capital vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study StartUp Capital Ventures, is just above the industry average. Scv's Capital needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High operating costs
– Compare to the competitors, firm in the HBR case study StartUp Capital Ventures has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Scv's Capital 's lucrative customers.
Lack of clear differentiation of Scv's Capital products
– To increase the profitability and margins on the products, Scv's Capital needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, Scv's Capital has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Opportunities StartUp Capital Ventures | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study StartUp Capital Ventures are -
Better consumer reach
– The expansion of the 5G network will help Scv's Capital to increase its market reach. Scv's Capital will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Using analytics as competitive advantage
– Scv's Capital has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study StartUp Capital Ventures - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Scv's Capital to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of Scv's Capital has opened avenues for new revenue streams for the organization in the industry. This can help Scv's Capital to build a more holistic ecosystem as suggested in the StartUp Capital Ventures case study. Scv's Capital can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Scv's Capital in the consumer business. Now Scv's Capital can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Scv's Capital can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Scv's Capital can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Learning at scale
– Online learning technologies has now opened space for Scv's Capital to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Building a culture of innovation
– managers at Scv's Capital can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
Developing new processes and practices
– Scv's Capital can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Scv's Capital to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Scv's Capital to hire the very best people irrespective of their geographical location.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Scv's Capital can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Scv's Capital can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Scv's Capital can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats StartUp Capital Ventures External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study StartUp Capital Ventures are -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Scv's Capital.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Scv's Capital will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Scv's Capital in the Finance & Accounting sector and impact the bottomline of the organization.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Scv's Capital needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Scv's Capital is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Scv's Capital needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Scv's Capital can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Stagnating economy with rate increase
– Scv's Capital can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Consumer confidence and its impact on Scv's Capital demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Increasing wage structure of Scv's Capital
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Scv's Capital.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Scv's Capital business can come under increasing regulations regarding data privacy, data security, etc.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Regulatory challenges
– Scv's Capital needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
Weighted SWOT Analysis of StartUp Capital Ventures Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study StartUp Capital Ventures needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study StartUp Capital Ventures is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study StartUp Capital Ventures is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of StartUp Capital Ventures is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Scv's Capital needs to make to build a sustainable competitive advantage.