Case Detail

Case Summary

Bartleby Ventures Values Vrooom Marketing

Case Number: 5-210-257, Year Published: 2010

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Authors: Derrick K. Collins; Jeff Borden; Scott Whitaker

Key Concepts

Cap Table; Capitalization Table; Liquidation Preference; Preferred Stock; Investment Committee; Media; Advertising; Entrepreneurship; Finance; Technology

Abstract

Bartleby Venture Partners LLP in suburban Chicago, a boutique firm with venture capital and investment banking capabilities, focusing on “growth stage” companies, was approached with the opportunity to invest in Vrooom Marketing, an information technology-based marketing firm targeting automobile repair shops. Vrooom had built a modest media network by installing flat screen TVs in automotive repair shop waiting areas, where commercial advertisements and content, such as car maintenance and safety tips, were broadcast in a continuous loop from a remote location through ISDN-based internet connections.

By early 2008, more than 400 muffler and brake shops, car parts stores and other repair facilities used Vrooom’s system, but Vrooom executives sought more capital to sign additional retailers and grow the media network. Bartleby managing partner and co-founder Theodore K. Cooke surprised himself with his own interest in the project and potential investment, since typically the firm rejected about 90 percent of the referrals received. Vrooom seemed unlikely to generate the 40 percent annualized return Bartleby set as a threshold. Bartleby needed to determine the overall value of Vrooom and accurately assess the marketing company’s growth prospects before committing to any investment amount. Cooke reviews “management case” and “Bartleby case” financials, as well as a prospective capitalization table to support his recommendation to the investment committee.

Learning Objectives

1. Students learn the actual work that a venture capitalist performs to value a firm; work includes due diligence, management talent assessments, risk assessments, speaking with referrals and meeting multiple times with the management team.
2. Students learn the basics of how to complete a template document commonly used in VC firms in order to summarize strategic, marketing and financial aspects of a prospective investment, and to make a recommendation of investment or not to invest;
3. Students learn valuation as a financial device- considering different financial valuation methods, including how venture capital valuation methods differ from common valuation methods of equity in publicly-traded companies (e.g., DCF, multiple of EBITDA, etc);
4. Students will learn the multiple assumptions and data points that contribute to the final valuation.

Number of Pages: 8

Extended Case Information

Teaching Areas: Entrepreneurship, Finance, Technology

Teaching Note Available: Yes

Geographic: Chicago, Illinois, United States

Industry: Venture Capital Finance

Organization Name: Bartleby Partners

Organization Department: Investment Committee

Organization Size: Small

Decision Maker Position: Managing Director

Decision Maker Gender: Male

Year of Case: 2008