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 - – there is backlash against globalization, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, increasing household debt because of falling income levels, technology disruption, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies,
competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, 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 -
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.
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.
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.
Learning organization
- Scv's Capital is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Scv's Capital is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in StartUp Capital Ventures Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Scv's Capital has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in StartUp Capital Ventures HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
Effective Research and Development (R&D)
– Scv's Capital has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study StartUp Capital Ventures - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Successful track record of launching new products
– Scv's Capital has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Scv's Capital has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
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.
Training and development
– Scv's Capital has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in StartUp Capital Ventures Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
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.
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 -
High bargaining power of channel partners
– Because of the regulatory requirements, John Glynn, Peter Ziebelman, Bethany Coates suggests that, Scv's Capital is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Aligning sales with marketing
– It come across in the case study StartUp Capital Ventures that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case StartUp Capital Ventures can leverage the sales team experience to cultivate customer relationships as Scv's Capital is planning to shift buying processes online.
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.
Products dominated business model
– Even though Scv's Capital has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - StartUp Capital Ventures should strive to include more intangible value offerings along with its core products and services.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study StartUp Capital Ventures, it seems that the employees of Scv's Capital don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Need for greater diversity
– Scv's Capital has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the StartUp Capital Ventures HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Scv's Capital has relatively successful track record of launching new products.
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.
Low market penetration in new markets
– Outside its home market of Scv's Capital, firm in the HBR case study StartUp Capital Ventures needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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 -
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.
Loyalty marketing
– Scv's Capital has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Scv's Capital can use these opportunities to build new business models that can help the communities that Scv's Capital operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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.
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.
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.
Leveraging digital technologies
– Scv's Capital can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Scv's Capital can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Scv's Capital can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
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.
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.
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 -
Technology acceleration in Forth Industrial Revolution
– Scv's Capital has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Scv's Capital needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Scv's Capital with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
High dependence on third party suppliers
– Scv's Capital high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Scv's Capital can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study StartUp Capital Ventures .
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study StartUp Capital Ventures, Scv's Capital may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
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.