Element Bars by Jonathan Miller - Case Study Example

The presence of a larger company developed to cater to the same market – You Bar – presented a challenge as the company was still in a stage of infancy (Shein, 2011). Another huge issue is the nature of the business which operates in the food sector rather than being a technological startup that comparatively attracts more investment.

A company that caters to the organic market possesses great growth potential. The market segment catering to health-conscious consumers of food is untapped and offering organic foods will help the company develop a hold. Hence, the company has a great potential for growth as consumer preferences have affirmed the need for organic food products in the market, especially organic energy bars. The best possible way for Miller to achieve financing is to convince venture capitalists of the value of the company. Asking a bank for a loan without material assets will not be a good option. However, Miller could use his persuasive presentation skills to convince venture capitalists to invest in the company. Additionally, Miller could have the startup enter into an accelerator that could give capital in return for a certain percentage of equity. In this way, the business could also get mentorship to enhance the business which could help the business grow.

The valuation of Element Bars is indeed a difficult task due to the lack of any company-owned equipment. The fact that the company uses ovens from a wedding baker and does not win its equipment makes the calculation difficult (Shein, 2011). Also, the fact that the company is not a technological startup and a fact a business dealing in tangible food products necessitates the presence of a sizeable inventory or some equipment that is required during production. I would therefore estimate the net worth of all the production inputs and additional effort by the founders involved. As such its net worth should be around $75,000. Jonathan could give up 25 percent of the ownership without damaging his involvement in the management and decision-making regarding the business.

Yes, I would accept the offer given by Kevin Harrington which demands only 30 percent equity in return for a capital amounting to $150,000. This amount is considerably greater than my estimation of its net worth, that is, $75,000. Also, it only asks for equity of 30 percent in return which is quite possible. Despite this, Miller will hold a 70 percent stake in his own company reasonable enough to run the business with his freedom. Read More