Private Equity & Venture Capital

Nurturing Green: The Growth Dilemma

Group- 05

Y. Akshay Bharadwaj M054-18 y.akshaybharadwaj18@iimranchi.ac.in 6204960511

Sarthak Gupta M176-18 sarthak.gupta18@iimranchi.ac.in 8130147480

Rakesh Kumar M166-18 Rakesh.kumar18@iimrachi.ac.in 8237440458

Question 1 - What should be the span of planning, especially during the growth stage of

an entrepreneur? Why?

Ans. The planning has to be done in bundles of short terms for a long-term result. In the

product life cycle (PLC), growth is the second stage where the sales, the revenues and the

profits are all rising and this would be followed by a maturity phase where the growth stops

and the market share starts declining.

Since the duration of the growth stage (or any stage for that matter is ex post), is not

known, the entrepreneur - Annu Grover should look to plan for the 8 quarters where he is

assured of a 3% funding every quarter. This way he will be able to know how to use the

funds and where to use the funds – whether for vertical or horizontal growth. Once these 8

quarters of funding are done, he should look to accelerate the growth for a longer period

such that he can capture most of the market share.

Question 2 - Which is a better strategy – to grow slowly or to grow quickly by surrendering

the majority of ownership to a VC? Explain.

Ans. Growing slow has the risk of not capturing the market share quickly, the risk of a bigger

player from an unrelated or similar industry stepping in and capturing the market with its

deep pockets – but it assures ownership for a longer period of time. However, growing

quickly needs funds quickly and quick funds would lead to giving up portions of the

ownership at every round of capital infusion, although the possibility of growth increases

with deeper pockets arises, the ownership dilutes.

Hence, the owner must decide what is more important right now – quicker growth with

higher market share but lower proportion of profits or slower growth with low market share

but high proportion of profits. Here, Annu should not give up control very soon and the 3%

every quarter looks like a very good mix of both the situations, giving up control really

slowly but getting capital at every round as well.

Question 3 - How would you have negotiated with the VC if you were Grover? What share

of the company would you have given the VC? Argue in support of your rationale.

Ans. Initially the numbers would have to be presented showcasing the past, current and any

future projections that we might have had – showing the growth and the potential to

expand into many channels. The gift industry was a large market with green décor double

the size of that. We were expanding and our expenses consisted only 26 % of the total
revenue on an average. Maintaining this number and getting economies of scale may lead

to us to a huge success – the costs might decrease as well. Catering to a niche market with a

first mover advantage still exists for some amount of time now until any other player enters

into the segment. I would have asked for good amount of funding and shared a high Return

on Investment but would hinder from giving out the company share. Development stage

when we needed funding, we had to go for 25% of the shares but now since we ourselves

are growing, it should not be more than 50% of this number which leads to 37.5% of the

company shares (an average).

Question 4 - What should be your sales strategy – to expand geographically or penetrate

deeper in specifically selected markets?

Ans. My initial strategy would be to penetrate deeper in specifically selected markets. 17.5%

of the customers are B2B and 30% online customers. Now this adds up to 47.5% (~50%) of

the customer base and which are majorly in metro cities with IT hubs. Moreover, the kind of

business model that Green Nurturing is into would be popular among citizens of Tier 1 and

Tier 2 cities only. Hence, initially penetrating deeper into selected market would be a good

choice and then specific markets which have not picked up can be looked at, localized,

customized and then be captured.

Question 5 - What is the optimum product mix for this company? Why?

Ans. Currently the company has 200 plants in different types of pots with several hundred

designs with 38 categories of plants. This number can be further grown and ensured that

the plants which are popular among your target group is there – adding more seasonal
plants if needed. Higher the variety, the more choices a buyer would have.

However, this might result in a problem of choice and confuse the buyers – also the

maintenance and stocking could become a problem. A little more diversification – probably

up to 50 categories of plants and about 250 plants would be a good fit.

Question 6 - What would you consider the best financial option for growth for Nurturing

Green? Discuss your reasons.

Ans. The company is generating income. The only key is that they need to get more

customers and expand further. The sales forecast was showing an upcoming growth which

may help them to generate funding from VCs. Partnership with Lifestyle stores and making a

strong online presence would help them to perform much better and are some of the

financial options for growth.

Question 7 - Was Nurturing Green’s innovation incremental or disruptive?

Ans. It looks to be a disruptive innovation because it wanted to transform the gifting

industry and create a new industry where gifting green plants were completely new to the

Indian market.