ACCT-545 Northwestern University – Dion is an engineer with Tesla Motors who helps to design electric motors. It has always been his dream to start his own business, but as he has gotten older,

QUESTION

Case Scenario

Dion is an engineer with Tesla Motors who helps to design electric motors. It has always been his dream to start his own business, but as he has gotten older, he has not gotten around to it. He is also an avid cyclist who rides near his home in Palo Alto, California. It is hilly terrain and as he has gotten older, he has found it more difficult to navigate the steep terrain.

He has thought about buying an electric bike that would give him an additional boost with an electric motor. However, he has not been satisfied with any of the many brands of electric bikes he can find. The ones that work well are astronomically expensive and the less expensive models are poorly constructed and have short battery life.

One day at Tesla headquarters, Dion is having lunch with three of his colleagues when he raises his frustration with his inability to find the right electric bike. The other three are also avid cyclists, so they launch into an intense discussion. Mark, who works in Tesla’s marketing department, thinks that there is a demand for a high-quality electric bike at a reasonable cost. “There are social trends that could drive that demand,” he says. “First, commuting by bicycle is becoming more popular, and many who are new to it need that extra assistance to make it a comfortable experience. Also, as the population ages, older cyclists are looking for ways to keep cycling as much as they did when they were younger. An electric bike could help them do that.”

Dion responds that some of the new electric motor technologies he has been working on could be repurposed to make a high-quality electric bike at a reasonable cost. “I have been experimenting with some designs, and I think it is workable.” Rosalinda, who manages production of the Tesla Model S interjects, “You know, I came across a defunct bicycle factory about 20 miles north of here when we were looking at potential sites for expansion. It would be perfect to manufacture the bike you are describing.”

Dion can’t hold back any longer and blurts out, “Let’s start our own bicycle company and make this bike!” Sandra, who works in the finance department, scrunches up her face and says, “Whoa there, partner. Where is the money for this venture going to come from? While our salaries and stock options have made us comfortable, we don’t have the resources to manufacture and market this bike.”

The group agrees that they would love to start a new company, but they must figure out how to solve the finance problem that Sandra pointed out in order to do so. Later that day, Dion can’t get the idea out of his mind. Then, a potential solution comes to him. He remembers Brenda Zhang, who rode with one of his cycling groups, Palo Altitude. She is a partner in a large venture capital firm that invests in promising start-ups. Dion isn’t sure if she even remembers him, and she only knew him as a cyclist, not an engineer. But he thinks it’s worth a try.

He sends the following email:

To: Brenda Zhang

From: Dion Morris

Re: Electric Bicycle Start-Up

Several of my colleagues at Tesla and I have come up with a new design for an electric bicycle that would be relatively inexpensive, very efficient, as well as durable. I know this is coming out of the blue, but I am hoping you will remember me from our rides with the Palo Altitude group. We are looking for start-up funding, and I thought a fellow cyclist like you would see the potential market for a high-quality, inexpensive electric bicycle. Please let me know what you think.

Later that day, he is surprised to find the following email in his inbox:

To: Dion Morris

From: Brenda Zhang

Re: Electric Bicycle Start-Up

Of course, I remember you, Dion. You were always at the head of the pack in our rides. I am intrigued by your idea and would like to set-up a meeting to discuss it. I need to start doing my homework on the venture to see whether I and my partners are willing to provide funding. In preparation for our meeting, I would like you to make a memo that addresses the following issues:

• Why do you think you can make successful start-up? What traits will you need to be an entrepreneur?
• What kind of leadership style would you use, and why?
• Describe your product and why you think there is a market for it.
• What legal form do you think best suits your start-up and why?
• What kind of financial document should you provide so that I can evaluate the viability of your start-up?
• What are the characteristics of your target market?
• Explain specific types of marketing the business should pursue.
• What other sources of funding might be available for you, whether or not we invest in your start-up?
• How would you organize your management team, and who in your group would lead each function in the organization?

What brand name do you propose for your electric bike, and why did you choose it?You are a good friend of Dion’s. He respects you for your degree in Business and Management and your good business sense. Dion feels inadequate in the details of business and asks you to draft the requested memo for him.

Draft the requested memo under Dion’s name.

Read through your memo to ensure all required elements are present and clear.

Business Details

• Why do you think you can make a successful start-up? What traits will you need to be an entrepreneur?
• What kind of leadership style would you use? Why?
• Describe your product and why you think there is a market for it.
• What legal form do you think best suits your start-up and why?
• What kind of financial document should you provide so that I can evaluate the viability of your start-up?
• What are the characteristics of your target customer?
• Explain specific types of marketing the business should pursue.
• What other sources of funding might be available for you?
• How would you organize your management team, and who in your group would lead each function in the organization?
• Refer to Dion’s coworkers from his initial conversation.
• What brand name do you propose for your electric bike, and why did you choose it?

ANSWER

To: Brenda Zhang

From: Dion Morris

Re: Electric Bicycle Start-Up

Dear Brenda,

Thank you for your prompt response and willingness to explore the potential of our electric bicycle start-up. I appreciate your consideration and look forward to discussing our venture further. In preparation for our meeting, I have prepared a memo addressing the key aspects of our business proposal.

Why do you think you can make a successful start-up? What traits will you need to be an entrepreneur?

As engineers at Tesla, my colleagues and I possess the technical expertise required to design and develop innovative electric motors. We believe this experience will translate seamlessly into creating a successful start-up focused on electric bicycles. Traits necessary for entrepreneurship include creativity, adaptability, persistence, problem-solving skills, and the ability to take calculated risks.

What kind of leadership style would you use, and why?

In leading this start-up, I believe in adopting a collaborative and visionary leadership style. I will encourage open communication, value diverse perspectives, and foster a culture of innovation. By empowering and motivating our team, we can leverage our collective talents to drive the success of our venture.

 Describe your product and why you think there is a market for it.

Our electric bicycle combines cutting-edge electric motor technology with a focus on affordability and durability. By repurposing the electric motor technologies developed at Tesla, we can create a high-quality electric bicycle at a reasonable cost. The market demand for such a product is driven by the increasing popularity of bicycle commuting and the need for an extra boost, particularly among newcomers to cycling and older cyclists seeking to maintain their active lifestyles.

What legal form do you think best suits your start-up and why?

Based on our initial assessment, we believe that establishing our start-up as a limited liability company (LLC) would be the most suitable legal form. An LLC offers a favorable combination of liability protection for the founders, tax flexibility, and ease of operation, which aligns with our goals and requirements.

 What kind of financial document should you provide so that I can evaluate the viability of your start-up?

To evaluate the viability of our start-up, we will provide you with a comprehensive business plan that includes financial projections, market analysis, competitor research, and details on our product development roadmap. This document will outline our revenue streams, cost structure, anticipated profitability, and growth strategies.

What are the characteristics of your target customer?

Our target customers are individuals who are looking for an efficient, durable, and affordable electric bicycle. This includes both newcomers to bicycle commuting who require extra assistance and older cyclists who wish to continue enjoying cycling on hilly terrains.

Explain specific types of marketing the business should pursue.

To effectively market our electric bicycles, we should pursue a multi-channel marketing approach. This includes online marketing campaigns, leveraging social media platforms, collaborating with local bike shops for distribution, participating in cycling events and trade shows, and establishing partnerships with cycling clubs and organizations. Influencer marketing and content creation highlighting the benefits and unique features of our product will also be essential.

What other sources of funding might be available for you?

Apart from venture capital funding, we can explore other sources such as government grants or loans specifically designed to support innovative start-ups in sustainable transportation. Crowdfunding platforms could also be an option to engage with early adopters and generate pre-orders.

How would you organize your management team, and who in your group would lead each function in the organization?

Our management team will consist of key individuals with relevant expertise. Mark, who works in Tesla’s marketing department, will lead the marketing and branding efforts. Rosalinda, with her production management experience, will oversee manufacturing operations. Sandra, from the finance department, will be responsible for financial management and investor relations. As the founder and engineer, I will lead product development and innovation.

What brand name do you propose for your electric bike, and why did you choose it?

We propose the brand name “Revolt” for our electric bike. This name conveys the idea of challenging traditional norms and revolutionizing the cycling experience through our innovative technology. It represents the empowerment and liberation cyclists can feel when effortlessly conquering challenging terrains.

Thank you for your time and consideration. I look forward to discussing these details further and exploring the potential of our electric bicycle start-up. I believe our shared passion for cycling and commitment to creating a high-quality, affordable product will drive the success of this venture.

Best regards,

Dion Morris