Questions : EXIT STRATEGIES

I think the problem is that Etrip is trying to be a ”big business” from day 1.


The concept is not bad, trying add to value to customers by offering them everything they
need for travelling according to their individual needs.


The problem for a startup though, is that they cannot be good at everything, as many of you
have stated, internal resources are limited. It seems to lack a dynamic growth
model, where is can adjust overtime to serve more individual customer needs as resources
becomes available.


With regards to exit strategies, I believe it must evaluate its opportunities and
risk tradeoff. When I looked at the Valuation Scenario Projection in exhibit
12, risks does not seem to have been taken into account.


Also, the founders seem to have to provide a large amount of funding, especially in the
later rounds. What will happen if the business is not keeping up with its
budgets? Investors will have to provide additional capital, on terms of a higher
return. Increasing leverage is not a good reputation to have in the traveling
industry, and leaves little room for maneuvering capital for an external
entity.


Pointing at a specific exit strategy with the material provided in the case is difficult,
and would I believe it would be too static to constantly compare an exit
strategy to one type of competitor. It should determine the value any competitors
would be willing to pay to acquire the company as it develops, hopefully to a
greater value over time. Meanwhile it has to evaluate risks, determine what are
the probabilities of a realization of the higher value. If the risk-adjusted value
gets below what Etrip can be sold for, I recommend to do so, to any kind of
competitor.


/Anders

Naomi_Karnovsky wrote:I just want to make a comment - why does the question say "if it proves to be a failure"? It seems to me, that for a small start-up who wants to expand and develop into something big, an exit could be a great opportunity. For example, if a big company decides to acquire e-trip and put a lot of money into it, this gives Etrip's team to actually get all the funding they need to be a full service provider, and fulfill their potential.

On the other hand, if an exit means that Etrip's team is leaving the project, it could also mean a good thing. This gives the necessary funds to start working on an even better start-up, a new project in which Har Adir and his team could implement their previous experience and acquired knoweledge and create something new. This is particularly true in the digital environment and ecommerce, where things change really fast and new trends take over. Who knows maybe in the future people will find some new and crazy way to but plain tickets ...

I agree with you Naomi, that's true that exit strategy can be planned in case of success as well!

Our biggest problem is that we cannot really evaluate what the Etrip technology is worth. We see an ugly, unfunctional website. But maybe there is a hell a of a search engine behind that. But I don't think so. Getting the layout done in a right ways does not take that much effort.

If you have enough funding to employ programmers to set up a really good search engine (which is not easy), then you should surely have the money to give it a nice layout as well since this is much cheaper than the real programming part.

Therefore I doubt that there are huges assets than can be sold. But I agree: Selling the company to a competitor would basically be a good idea. Obviously ETrip needs some input, maybe it be new ideas or further funding. A competitor who is in the same business might provide just that. And in case the technology is worthless and the competitor just takes ETrip off the market... well, at least the investors got some money back then.