Our starting strategy was based on the maximization of the Value of Founders' Equity as this was the objective of the game. To accomplish, we split our strategy in two stages:
1. Using the model to establish our strategy for the first 60 days 2. Analyze market behavior and adjust our strategy accordingly to increase marketshare
However, in the middle of the game we had to rethink our strategy and modify it by doing the following:
1. 2.0. Decelerate decrease of equity value 2. 2.1. Devise a new growth strategy
First Stage
For the first stage we used the startup model for students excel archive to search for the maximum value by iing the same amount of money in R&D and Marketing expenses. By this operation the amount that we obtain was US$ 9,063.
Our numbers with those amounts are shown below:
However, as we wanted to have at least 50% control of the company, we only issued US$ 100,000 worth of shares to investors. As we knew that our full capacity was not going to be required since day one, we estimated that adjusting the burn ratio according to the market requirements would compensate those US$ 14,000 less on investor’s equity. Our estimation for the Value Founders’ Equity was US$ 1,418,116.
To calculate the burn rate, we used the estimated variation of the market share and multiplied it with the market size; the result gives us the required PP&E investment. We divided this number by the total PP&E to to obtain the burn rate. The formulas that we used for the variation of the market share are as follows:
Up to this point we disregarded the compound interest obtained by the cash on hand. Instead of modifying the burn ratio, we should have invested in PP&E only the necessary amount to fulfill the expected market share of the day.
To accelerate the growth, we issued 1,100 shares to employees, which helped increase equity value by approximately US$ 25,000 without additional cost.
Second Stage
When we reached the day 60, we saw that we were on the track. However our growth wasn’t as fast as expected so we raun a new simulation and program the lasts PP&E investments required by the market share increase by the employees’ shares.
By day 250 we realized that our equity value was going down and that other groups, even though they were in another game, were growing faster than us. At hits point, we executed Phase 2.0 to decelerate the decrease of equity value and refined our strategy (Phase 2.1) to increase shareholder value.
Phase 2.0
2.0 was simple and reactive. The idea was to reduce our expenses and the faster way of doing that without dramatically affecting our market share was reducing the R&D expenses as the R&D share was based on accumulative expenses.
Phase 2.1 Strategy
While 2.0 was being executed, we where thinking on 2.1. We
