Venture Capital and Low Cost Production Essay

638 WordsMar 21, 20123 Pages
DermaCare has the potential of a successful business. They have taken several steps in the right direction so far by obtaining patents that protect their intellectual property both for sale through DRTV and the retail market and sourcing for low cost production costs. In addition, there are no obvious loopholes in their business model. They have a proven product that provides a solution to a large market of dissatisfied customers. Also, they are maintaining 400% margins by selling through infomercials and websites direct to customers, therefore avoiding marketing and packaging costs associated with retail distribution. However, like every start-up company, there are certain challenges that may prevent them from being successful. - There…show more content…
They will be advisable for them to invest even more in media up front (up to $500,000) to ensure they achieve their milestones. Also they have not been earning any salaries and have invested significantly in the business; one of the VC’s suggested an annual salary of $225,000 per annum as the CEO’s salary. Also they may require offering customers some form of warranty on the products as an incentive for the customers to try the product for the first time,that will increase their cost at the early stage of the business. The business will be self sustaining as soon as they can begin to achieve positive cash flows on their business. Evaluating the Financing Offers Band of Angels LLC: The Band of Angels is a unique Venture Capital firm because it provides some of the benefits that are typically only found with Angel Investors. Access to industry experts and mentors for the founders is huge benefit. Typically VC backed companies usually have a professional and efficient company because Venture Capitalists consistently push the founders and CEO to achieve set milestones. They have access to a larger pool of investors and can invest more capital if required. On the other hand, VC’s drive a hard bargain and usually offer less favourable terms. The Band of angels are - VC’s provide management

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