Madhu Mathur and Kiran Kotha, MBA classmates, decided to start a company called 'Virtual Investments', a social networking site for investors to share and track their investment activities. They recognized the importance of establishing a solid partnership agreement and developed a revenue model involving registration fees and commissions on deals made through the site. Both founders plan to invest Rs.50,000 each and work full-time without drawing a salary until the company becomes profitable.
Madhu Mathur and Kiran Kotha, MBA classmates, decided to start a company called 'Virtual Investments', a social networking site for investors to share and track their investment activities. They recognized the importance of establishing a solid partnership agreement and developed a revenue model involving registration fees and commissions on deals made through the site. Both founders plan to invest Rs.50,000 each and work full-time without drawing a salary until the company becomes profitable.
Madhu Mathur and Kiran Kotha, MBA classmates, decided to start a company called 'Virtual Investments', a social networking site for investors to share and track their investment activities. They recognized the importance of establishing a solid partnership agreement and developed a revenue model involving registration fees and commissions on deals made through the site. Both founders plan to invest Rs.50,000 each and work full-time without drawing a salary until the company becomes profitable.
Madhu Mathur and Kiran Kotha, MBA classmates, decided to start a company called 'Virtual Investments', a social networking site for investors to share and track their investment activities. They recognized the importance of establishing a solid partnership agreement and developed a revenue model involving registration fees and commissions on deals made through the site. Both founders plan to invest Rs.50,000 each and work full-time without drawing a salary until the company becomes profitable.
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Full Name: Bhagyashree Mahajan
INSTRUCTIONS: In this exercise, you will play the role of KIRAN. While you are reading the case and working through the questions listed at the end, imagine that you are Kiran. You will have a total of 10 minutes to read the case and answer the question listed at the end. Please do not discuss the case with anyone during this time.
As you read through the case, consider the following information:
VIRTUAL INVESTMENTS – THE CASE
About a month ago, Madhu Mathur and Kiran Kotha had together decided to start a company called “Virtual Investments.” As both Madhu and Kiran had no prior entrepreneurial experience they attended entrepreneurial support meetings to figure out what they should be doing. They were repeatedly told by experienced entrepreneurs that most companies fail because the founders are not able to specify appropriate startup partnership agreements. The most important next step, they decided, was to specify a good partnership agreement.
Background
Madhu and Kiran met in the IIMB management program. They became close friends over the course of the program and spent several evenings every week studying together, playing with other classmates or talking about becoming entrepreneurs. Both of them were finance buffs and had taken several finance courses in the MBA program.
Before joining the MBA program, Madhu worked in a large IT firm for 3 years, was passionate about open-source software and contributed to a lot of open source initiatives whenever time permitted. Besides finance classes, Madhu tried to take as many production and operations management classes as was possible.
Kiran had worked as a sales manager in a consumer products company for three years before coming to the MBA program. Kiran had a flair for marketing and had taken several marketing and sales related courses at IIM.
The Company
During the summer between the first and second years of the MBA program, Madhu hit upon an idea for a social networking site for potential investors. The idea was very simple:
...a website which would serve as a platform where multiple investors signed up and talked about their investment activities. The ventures that a member invested in would be available to all members of the website. The performance of these ventures would be tracked and posted to all members. This would encourage further investments in firms that performed well thus improving its chances of being funded.
Madhu talked about this with Kiran and mentioned the struggle to come up with a viable revenue model for the venture. Kiran loved the concept of a networking site for investors and started thinking about a way to make the website generate money. They decided to meet again in a week’s time and brainstorm about it. When they met again, Kiran was very excited about having come up with an idea for the revenue model:
...investors could of course be charged a registration fee when they signup on the website. Apart from this, they could also be charged a commission for every deal made because of the networks formed on the website. But the reason they would be willing to pay was because Kiran’s uncle who had worked in the investment industry for more than 10 years had agreed to be a part of the board of directors and provide special advice for paying members.
Madhu loved the idea. They decided to become founding partners and named their venture, “Virtual Investments”. Kiran would market the product and Madhu would work on building the actual website. They knew they would both be almost broke at the end of the MBA program but could afford to put in Rs.50,000 each towards the venture. They would both work full time in the venture but decided that they would not draw any salary until the company started making a profit.
