Chapter 15 MiniCase PG. 577

MiniDiscs Corporations

Answer A-F

Chapter 15: Harvesting the Business Venture Investment 577 MINICASE MiniDiscs Corporation Brian Motley founded MiniDiscs Corporation at the end of 2011 with a $1 million investment. After nearly one year of de- velopment, the venture produced an optical storage disk (about the size of a silver dollar) that could store more than 500 megabytes of data, along with a mechanism allowing the device to be integrated into a variety of portable consumer elec tronic devices, including e-books, music discs, and video games In addition to Brian Motley's role as the venture's CEO, Susan Sharpe, with six years of prior financial management experience at two high-technology ventures, was hired as the CFO. The vice president of marketing was Steven Davis and the vice president of operations was Sanjay Chavarti. Before being hired by MiniDiscs, Davis had twelve years of marketing experience in the technology area. Chavarti worked in high-tech operations for eight years before pursuing the opportunity with MiniDiscs. Leading electronic manufacturers were eager to incorporate the minidisc in their products. Brian Motley obtained $7 millon in financing at the end of 2012 from venture investors in exchange for 43 percent of the stock in the venture After this round of venture financing, Brian retained 50 percent ownership in MiniDiscs, and the other three members of the management team (Sharpe, Davis, and Chavarti) owned 7 percent of the venture Over a four-year period (2013-2016), MiniDiscs moved quickly through its startup and survival stages and is now in the midst of its rapid-growth stage. Brian Motley has recently decided to harvest his investment by selling the firm. However, the other three members of the management team want to continue and proposed a leveraged buyout to Brian Motley. An external valuation firm estimated that $45 million represented a fair price for all of the equity in the MiniDiscs Corporation An abbreviated balance sheet in thousands of dollars for year-end 2016 follows Current assets $15,000 15,000 Payables and accruals Long-term debt Common equity Total 5,000 10,000 15,000 $30,000 Fixed assets, net Total 30,000