Babson Case Number: BAB109 | Length: 8 Pages

Abstract

This case was written as a “B” case to be taught with the “Ajay Bam” case, BAB 070. The cases deal with a nascent high-potential business that is conceived by two MBA students who have no experience in the industry where they believe they have found a niche for an exciting new product, a technology platform that enables consumers to pay for merchandise and simultaneously participate in loyalty programs using any type of cell phone.

The cases should be positioned about one-third of the way into a new ventures course—after the initial cases that are funded by the 4Fs and immediately before the formal venture capital case.

Ajay and his partners conceived Vayusa just as the Internet bubble was bursting. When they were earnestly shaping the opportunity in the spring of 2001, investors were dumping Internet stocks so fast that valuations plummeted. Venture capital returns turned negative for the first time in history. Business angel investors were suffering as much—maybe more—than professional venture capital firms. In May 2001 when Ajay Walter and Troy were graduating, it was virtually impossible to raise any money from venture capital firms or business angels for a seed-stage company, let alone a seed-stage company with neophyte entrepreneurs who lacked business experience. Nevertheless, Ajay and his partners were not discouraged. They went ahead with the development of a simple prototype. They continued to develop their contacts, including venture capitalists, angels, merchants, advisors… indeed, anyone who could help them develop their venture.

As the Vayusa case unfolds, Ajay and his partners were on a treadmill: Potential investors wanted evidence that there was a market… to prove there was a market demand, Ajay needed a prototype that could be evaluated by consumers and merchants… to develop a working prototype they needed money… to get money they need to show potential investors that there was a market demand… They had no choice but to continue bootstrapping they venture.