Jeffrey J. Bussgang, Amy Klopfenstein, Amram Migdal
Harvard Business School (820098-PDF-ENG)
May 19, 2020
Sandra Richter, co-founder and CEO of Soofa, a network of ad-supported digital whiteboards, has to decide between two different fundraising and expansion plans for her business in November 2019. One plan is to raise $ 15 million in a round of Series A and follow an aggressive expansion strategy, while the other is a more modest increase of $ 3 million to bring the company to operating profitability. Richter had developed the $ 15 million plan with an executive introduced by her venture capital board members with extensive fundraising and startup experience; However, after months of talking to investors, it was not possible to create a term sheet with the aggressive expansion plan. Richter must decide if rapid expansion is the way forward for the company, as she begins to wonder if her company could realistically deliver on the prospects of the plan, even if she could secure funding for financing. Meanwhile, the capital of Soofa was shrinking rapidly. Richter will have to raise another round of capital in early 2020 or he will be forced to lay off most of his employees and shut down his operations. Should you continue with the aggressive expansion plan, switch to the more modest plan based on operating profitability, or try to pursue both plans at the same time? And how should you deal with the growing tension on your board, given the problems the company faces?
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