The Professor’s Tale: The Venture Capital “Game”
By Jim Penn
Professor Ferdinand Von Rumproast appeared to be very tired as he approached the podium. “Good day, class. I apologize for my rumpled appearance, but I was unable to sleep last night. I went to my study to read and noticed a strange glow coming from my Mont Blanc. Before I could recite Moore’s Law, the pen leaped into my hand, and I began to write. The result was a story about business enterprise, our topic for this class.”
With that explanation, the good Professor Ferdinand Von Rumproast began to read.
Rinky Dinky and Razz Matazz and Their Business Adventure.
Rinky Dinky and Razz Matazz were good friends and attended evening MBA classes at Ye Old University. It was business plan presentation class, and Rinky was backpacking their business plan and a product prototype for their offering.
As they crossed the parking area, they came across three unusual persons. They stood apart from the rest of the campus people, yet others did not notice them. Rinky and Razz observed that one had a tail, another antlers and the third a pronounced proboscis, almost a trunk.
Anticipating the threesome were going to block their progress, Rinky looked at his watch and exclaimed, “My goodness, we’ve only got three minutes to make it to class.”
The trio blocked their path. The antlered fellow pointed a finger at Rinky and said, “Time has no meaning unless it’s connected with getting a product to the market. Too early, and it’s late. Too late, and you’ve missed the gate.” The other two nodded approvingly.
Rinky responded. “You don’t understand. Our professor will be very angry if we’re late. He doesn’t accept tardiness.”
The person with the tail, a woman, confronted Razz. “And what’s your excuse for being late? Keeping bad company, I suppose.”
She walked around Razz, sniffed him vigorously, and exclaimed, “You smell like a candidate for a Master’s of Business Administration degree.” She turned to her companions. “Doesn’t he? Doesn’t he?”
The fellow with the trunk-like nose sniffed a bit, “Yes, no doubt about it, no doubt about it. They’re both of the same ilk.” This statement upset the antlered person. “I said ilk. I didn’t say elk. Don’t get upset. I meant no disrespect.”
Well, you can understand the amazement of Rinky and Razz in meeting these strangers. Razz blurted out, “Will you please let us pass? We have to get to class. We have to present our business plan and introduce our product.”
The threesome stood fast, and the antlered person stepped forward. “You don’t need to go to class. You’ve come to the proper people to review your business plan. Let me introduce us. I’m Legalus Complexus, a lawyer specializing in corporate securities. The lady with the beautiful tail is Maximus Profitus, a CPA, and to my left is Romulus Capitalus, the venture capitalist.”
They then broke into song: “We find ‘em. We send ‘em…to the SEC. They review ‘em. They approve ‘em. Then, it’s proper as can be.”
Rinky muttered, “Oh, the professor is going to be angry with us now. I…”
“Aha! don’t give us that. Let’s see your business plan. Show us your product. We’ll know in a very few minutes if we can do a deal.’ He turned to his companions, ‘Won’t we?”
“We certainly will. We separate the gold from the swill,” Maximus and Romulus responded in unison.
“Thank you for your offer, but no thanks,” Rinky said as he tried to move around then.
But they were not to be denied. Legalus grabbed Rinky, and Romulus grabbed his backpack which he opened, removing a thin binder and what appeared to be a block attached to a base. They set the block on the ground and read the writing on its base. Legalus was the first to comment. “MindBlockÔ, MindBlock, why it doesn’t even have a clock. It’s nothing at all. Hmm, it does look pretty sitting there. What is it?”
“It’s a low-tech motivational aid.”
Legalus held and smelled the block, and said, “Low-tech! This won’t sell. It doesn’t even have a bell. But, high-tech, low-tech, even it if doesn’t make sense, what the heck.”
Romulus continued, “We need to know more, for you to financially score. This will only take a few minutes.” They sat down in the parking lot, read the plan and passed the product back and forth. After several minutes that seemed like an eternity to Rinky and Razz, he spoke, “You covered product need, customers and markets, competition and management. Most businesspersons need motivational tools. There doesn’t appear to be any competition in the MindBlockÔ field, although there’s intense competition in motivational devices and programs. What disturbs us is your lack of management.”
Rinky took a step forward and asserted, “Our undergraduate degrees are in marketing and finance. We have jobs that use those skills. We can run the company.”
Legalus, Maximus and Romulus huddled. It was an animated discussion with antlers bobbing, tail-twitching and proboscis flailing.
Again, it was Romulus who spoke, “Let’s do a deal. Your business plan states you need $1 million. We’ll give you $750,000, and we’ll take a 51% interest in the company and an additional 15% just because. That leaves you 34%. We want three seats on a five-person board of directors and when, we…ahem, you do an IPO, we’ll dilute our interests equally.”
Razz answered in anger, “Why, that’s robbery. Clear and simple robbery, I…”
Romulus and his cohorts started to empty their pockets. “Robbery, where’s the gun? Where’s the knife? This is all subject to negotiation. We haven’t stamped our seal. We’re just trying to do a deal.”
Maximus continued, “There’s a lot of risk…tisk, tisk. This is a single-product line. The toughest to sell. Why your product doesn’t even have a bell!”
Razz spoke up, “We’re going to direct market our product. We’ve got a manufacturer all set up to go once we receive orders. Very little risk.”
Rinky and Razz huddled and countered with, “All we need is $250,000. We’ll give you 25% ownership and a sweetener of 10% if we do an IPO within eighteen months, and the offering share price is $6 or greater.”
The threesome expressed outrage. “You don’t trust us; you disgust us. You’ll need more than $250,000. We’ll give you $575,000. Remember, 100% of nothing is still nothing.”
Rinky and Razz stood their ground and said, “No, no; now please go. We’ll borrow on our credit cards; we’ll borrow from our parents; we’ll borrow from anyone who will listen; we know we’ll make it.”
With a flash that momentarily blinded Rinky and Razz, the threesome were gone, and they found themselves in front of their classroom with two minutes to spare. The backpack was again on Rinky’s back, with business plan and prototype intact. Rinky looked at his watch and exclaimed, “We’re going to be late, for a very important class and, if we’re not there on time, we’re not going to pass!”
They ran into the classroom and took their seats.
The professor looked very pleased as he greeted the class. “Good evening class. I have a surprise tonight. I’m honored to introduce three experts in start-up ventures who will help me assess your plans and products. They are Henry Wainright, a corporate securities lawyer, Susan Pickering, a CPA specializing in investments and IPOs, and Romey Hemminburg, a venture capitalist with Aim for the Sky Ventures.”
Rinky and Razz sat back and stared. There was no doubt about it. These were the three they’d encountered in the parking lot, except that the antlers, tail and trunk-like nose were gone. They looked at each other, and Razz whispered to Rinky, “No way, no way.”
And while he was saying that, the visiting experts winked in unison at our friends.
The professor finished his story and placed the manuscript in his briefcase and adjusted his vest. The class sat in complete silence, stunned by their professor’s creative work. After a brief moment without any “experts” present, class began.