Nanogene

Juan Carlos Yglesias

MGMT 612 - NanoGene Technologies Inc. Case

1. The way the founders assigned the salaries and compensations would be the first red flag to me as an investor. When it comes to evaluate the potential profitability of a company, all aspects need to be considered; this includes the distribution of pay amongst the founders. If I were a venture capitalist and saw that the CEO of a company earns a relatively low salary in comparison with the rest of the market, and the co-founders were receiving a higher salary than they should I would suspect that the CEO has doubts on his potential to be able to run the company. The reason why I consider this is because if a CEO is not willing to take at least the standard entrance salary, he or she would either have reasons to doubt his ability, or to please his co-founders rather than to run a successful business. In terms of the compensation policy being considered for the company, as a venture capitalist I would be very open to having multiple options as opposed to a fixed salary because multiple options for compensation illustrates a dynamic workforce.

The second red flag that would worry me as a venture capitalist is the fact that the founder team is too big and that all the team members have the same power when it comes to decision-making because they own the same amount of shares. The fact that the founding team consisted of 5 members, which is consider relatively big for companies searching for venture capitalists, creates a problem when decision-making time comes. Its crucial that all members agree with each others decisions, so agreement tend to be simpler when less people and opinions are involved. In respect to the composition of the team, it is better that somebody owns at least a minimum amount more than the others, so he can have the decision control. As a potential venture investor the way the equity is divided within the founders is relevant, because it´s easier to negotiate and get to...