11.18. CASE: FEED Resource Recovery

It was the spring of 2006 and Shane Eten had just won a $20,000 sustainability award at the highly competitive Rice University Business Plan Competition. Shane was already thinking about how he would use the $20,000. This wasn't the first time his idea, Feed Resource Recovery (feed), had won or placed well in a business plan competition—he'd finished second at the Babson College, second at the University of Colorado, and second at the UC–Berkeley competitions. Although the prize money and services in kind were helpful, Shane knew that he couldn't successfully launch his business on prize money alone. Shane estimated that he would need $150,000—$250,000 to build the anaerobic digester prototype and much more money after that to scale production and sell the system across the country. Where would he get the money?

Based upon his success in the business plan competitions and through strong personal networking, Shane had talked to several venture capitalists and they all expressed strong interest in the business. Potential investors seemed to be coming out of the woodwork, but still Shane was uneasy. How much of the company would he have to give up if he was going to secure their investments? Even from his preliminary conversations with the venture capitalists, he knew that the valuation[] of the company was only going to be part of the problem. He was discouraged by the grim prospect of having to jump through hoops, answering the venture capitalists ...

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