Babson Case Number: 049-C99 | Length: x Pages

Abstract

Xerox Corporation, founded as a copier company in 1958, decides in the late 1980’s to take advantage of the products and technologies developed internally but not directly related to the company’s core product line. Creating a wholly owned venture capital (VC) organization, Xerox begins investing in internally generated ideas with plans to eventually spinout these companies as IPO’s.

The chief managers at the VC company do well for the first two years with a portfolio of ten companies that are mostly software developers. They create an entrepreneurial environment in the new companies by offering employees highly leveraged equity plans with the payoff coming at IPO. However, they begin to have doubts about their ability to keep the venture capital company profitable. They wonder weather there are better models available to improve the performance of these wholly owned entities.