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Selected Case

published: 05 Jan 2006

  • Topic: Entrepreneurship
  • Industry: Services
  • Region: Asia

Abstract:
The case describes the founding process of a unique human capital assessment venture based out of Bangalore, India. Particular emphasis is placed on how the founding team was assembled and the contributions and inducements offered to the different team members. The case focuses on four structural aspects of founding teams: (i) incentive alignment within the team (ii) complementarity of skills and social capital (iii) Fit in terms of values and (iv) Governance issues when the shareholders are also operating executives. The key short-term challenge facing the protagonists revolve around how to rescue the venture from a cash flow crisis which could lead to bankruptcy. The longer term issue is whether structural flaws in the current founding team could lead to significant governance issues that could drive an otherwise promising venture into the ground. The case is designed to have users (i) identify the key structural issues in founding team design and (ii) diagnose what could go wrong with a particular structure - especially if the venture gets into a growth trajectory. In addition, the case can also be used to illustrate the importance of cash management in new ventures and raising funds in a tight market.

Pedagogical Objectives:
The key teaching objective of the case is to lay out a framework on founding team composition so as to minimize predictable tensions and conflicts and maximize the chances of building a solid organization. The case is useful to illustrate the importance of aligning incentives within the team, paying attention to complementary skills and social networks, and the importance of shareholder agreements as a way to set the rules of the game governing shareholder behavior in start-ups. In addition, the case outlines the importance of cash management in start-ups.


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