Quiz #2: Did This Business Plan Succeed?

Test your entrepreneurship skills.  Read through the profile below and try to determine whether or not you think this startup survived.  The outcome (or the current status) is shown below:

The Idea:

Concept: A Web-based service that delivers groceries, dry cleaning, videos and other items to your door. Market statistics show that shopping centers are located within 2.5 miles of their customers. By consolidating deliveries and offering a wide product selection, the company purports to solve the "last mile" challenge faced by big freight carriers like United Parcel Service (nyse: UPS) and FedEx (nyse: FDX).

Funding: $750,000 raised from friends and family, plus $100,000 of the entrepreneur's own stash, on which the company has operated for nearly 18 months. There are no profits to plow back into the operation.

Management Team: The entrepreneur is on his third startup. (One was a software company he sold while getting his MBA, the other peddled novelty souvenirs and is now run by his wife.) Beneath him are a handful of programmers to build a Web site that accepts, prioritizes and processes orders. Another team shops and delivers. The owner handles all PR. There is no board of directors. A board of advisers, made up of the owner's college friends, are also investors in the company.

The Outcome:

The candidate: a Web-based delivery service, started in 1999, that brought groceries, dry cleaning, videos and other items to your door. A mere 18 months old, it was working on $750,000 raised from friends and family, plus another $100,000 of the founder's own stash, and had still posted no profit. More challenging still, while the founder had launched two previous startups, the company had no board of directors; it did have a board of advisers (who also had invested in the company) made up of the founder's college friends.

This company---which chooses to remain anonymous---was no Webvan, the once high-flying tech company with a similar model that ended up in the e-commerce trash heap. It shored up its management team by hiring a logistics expert formerly with FedEx (nyse: FDX), an ex-chief of grocery store chain American Stores (now part of Albertson's (nyse: ABS) and the head of another delivery company similar to FedEx. It also surveyed its customers to prove that its model would attract people who lived up to four times farther away than its core customer base. (The company paid for the investments via a bridge loan; the lender agreed to accept part of the payment in stock.)

Result: The company managed to raise $850,000 in venture funding. It is still in operation, profitable on an after-tax basis and growing through acquisitions. No further outside capital was required.

Source: Forbes.com


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