Facts of the case is listed below:
Jim, as a second year student takes up internship opportunity in a solar electric company.
Jim presents his idea of a solar powered trash compactors to the company, but his ide@s are rejected as not being feasible or that the product did not fit into their product line strategy.
Post internship, Jim collaborates with another’s engineering student in designing a grill to manage tailgating.
Jim incorporates a company, Seahorse Power Company which would develop systems that harness ocean current energy. Another idea was to conduct abandoned oil wells to explore opportunities of producing geothermal energy.
These ideas were again rendered to be unfeasible. Venture capitalists were more into wind energy since it was in trend with high growth and returns.
Jim developed a data bouy to assist wind energy companies in acquiring meteorological data. But yet again, the risks were high in implementing this concept.
Jim returned to his original idea of trash compactors.
Jim joined hands with Alex and conducted market study to explore the opportunities in the compactor market. Seed fund of $22500 was made available.
Jim applied for a provisional patent for the solar powered waste compactor. Jeff and Richmond who had product design skills job Ines the team.
The concept was tested using kitchen trash compactor.
Initial business calls were made to a ski resort in Vial who were impressed with the idea and promised to order three compactors.
Purchase order was received from the ski resort for one compactor.
Contract manufacturing of the cabinet system for the compactor was placed with Boston Engineering that was within the budget.
The design and development schedule had missed the initial deadlines, but SPC were able to deliver the first compactor to the ski resort.
The product had not been tested for quality or performance before the delivery and that was a risk SPC was taking.
However, the feedback from the ski resort was good and the first customer was happy.
The feedback also revealed that there were scope for improvements in the product in terms of higher protective security and performance.
SPC incorporated these improvements in its next generation of the compactors and was now targeting assembly of 20 plus compactors.
With the prospects for patents increasing, many investors got interested in funding SPC.
All the team members who had worked in founding the company were given equal share in ownership. This had created apprehension amongst some of the potential large investors.
The investors were willing to fund $50000 to meet the immediate orders that the company had in their pipeline, but wanted to conduct due diligence for the $1.5 million funding.
Jim was happy to work with the immediate funding without changing the ownership patterns and explore other investor sources for higher amount of funds.