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Reference no. 803-006-1
Subject category: Entrepreneurship
Published by:
Babson College (2003)
14 pages
Data source:
Field research


This case is the first of a two-case series (803-006-1 and 030-C95B-P). The case series deals with raising two rounds of venture capital for a high-potential software company. The Jon Hirschtick case shows the important ingredients of a ''classic'' venture capital-backed start-up: an ''A'' team, with an ''A'' idea, in an exciting high-tech industry. It enables students to examine the search for venture capital and the valuation of a seed-stage, high-tech business. Also it can be used to illustrate career paths both in high-tech entrepreneurship and venture capital. This case is positioned in a new ventures course as a classic seed-stage venture capital deal. It is positioned to follow immediately after the case ''Neverfail Computing (A), (B), (C) & (D)'' (802-041-1), which is funded at the seed stage first by the founders and then by angels, with venture capital not being invested until the early-growth stage. Hence, Neverfail is 4F-funding (founders, family, friends, and foolhardy) followed by venture capital. In contrast, Jon Hirschtick is a ''classic'' seed-stage deal: the founders work for no pay to develop proof of principle demonstration of the technology, to write a business plan, and to search for venture capital.


Creating a high-tech software company; Developing a prototype; Positioning a new product; Building a team; Raising venture capital; Valuation; Negotiations; Value added by venture capitalists; Ownership; Founders' stock; Stock options
Pre-start-up and start-up
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