Problem
Navjot is the sole shareholder in his small design company. He recently applied for, and was granted, a patent on his latest product called the "truckBug"?a revolutionary product designed for the multi-million dollar babycare industry. He has shown the TruckBug to several parent groups and to a large babycare retailer and has had very positive feedback.
Navjot's only problem is capital.
To fund production of the TruckBug, with proper marketing to?meet his customer demand projection, he would need some?heavy investment. Without investment, his product is worthless as he could never produce, market and sell it in a sufficient quantity to get a return.?Ideally, he needs a backer who can help within the industry, someone with a background in turning ideas into retail success. Money, though important, is not the only thing Navjot lacks.
To this end, Navjot has arranged a meeting with two Investment Capitalists. He has met with both previously and completed his presentation. Essentially he?is looking for $100 000, and is willing to offer up to a?maximum of 35% equity in his company, though he has initially asked both investors for $120 000 based on 25% equity. Navjot has a touch choice ahead as both investors are keen on?the project.
He has received two bids:
Investor?1 ?Investor?2
Investment?$?100?000?$?120?000
Equity?share?40?%?45?%
Navjot is cautious about the equity share issue, as both Investors want much more than he has been prepared to agree on. He certainly does not want to lose overall control of his company ?but without investment, the value of his company is very little.
Navjot needs to make a decision at today's meeting, as he really?needs to get the investment in place and move forward as soon as possible. There is room to negotiate with both investors, but not much, and Navjot is aware that he does not want to lose their interest!
Task
i. What are the interests of Navjot going into this negotiation?
ii. What are the interests of the investors in this negotiation with Navjot?
iii. What are the negotiable?issues in the case and their related priorities for each party?
iv. How might Navjot set his entry and exit points in this negotiation?
v. What justification would you give for a proposal that Navjot might offer?to Investor1?