PunchTab Inc. Harvard Case Solution & Analysis

Punch Tab Inc.

Background:

The report presents a case about, Punch Tab Inc. It is an Internet-based company, which operates a customer loyalty based program  for website owners, mobile application developers, and brands. Punch Tab provides an opportunity to reward their users with redeemable loyalty points for desired actions as they take on their sites including making purchases, visiting a site daily, and sharing the site’s content on social networks.

YousendIt was founded in 2003 ,which was a web-based secure digital file delivery but later on, the entrepreneur believed that there were loopholes in the existing strategy. Users were facing difficulty so the concept of Punch Tab was developed and the organization continuously worked towards enhancing the potential strategy. In order to finance the potential strategy, the organization required substantial funds, so the owners evaluated the financing possibilities and three financing options were drawn.

Problem Statement

The management was concerned about the financing arrangements to finance the new strategy. Further, the management was also concerned about the different aspects of angel and VC investors and an evaluation of the strategy, which would fit with the operations of the company.

Analysis

  • 1.      What does Punch Tab do? What is their business model?

Punch Tab is an online business program where website owners are provided instant online loyalty program in which consumers can earn universal loyalty points that can be redeemed across participating network of companies. The idea of such business has been developed by having a thorough conversion with online business and big brand companies with a strong web presence.

Many industries like airlines, apparel vendor, and consumer electronic store were concerned about their loyalty program. These entities wanted a more compelling program but did not wish to invest heavily on development and marketing cost, so such program would facilitate number of industries in maintaining and running an effective loyalty program, which would work towards achieving the corporate mission of organizations.

Punch Tab platform comprises of four parts. The first part is authentication (login), where the site’s users can connect to their Punch Tab loyalty program using Facebook. The second part is currency where users will earn for various desired action. The third part is earning mechanics that are specific and desired actions that resulted in the users earning currency and the last option includes the catalog that was the customizable list of rewards in which users could redeem their points.

The business model that is adopted by Punch Tab is very attractive and the co-founders believe that in case the company expanded then the company’s employees will also grow. Further, the company adopts a flexible business model where all employees are continuously motivated towards achieving the corporate mission of the organization. It can further be justified from the fact that the company continuously received referrals from its network of bankers, employees and vendors. This indicates that they have strong relationship with numerous venture capital, which can be used by the management to satisfy its future personal needs.

  • 2.      Is Punch Tab a good candidate for early-stage investment- should they be raising at this stage? What are some reasons that an entrepreneur might seek investment at this stage, for this type of company?

An investor is only concerned about the funds invested in the business and the relative returns, which are expected to be generated from the business. In addition, investor will only invest in the business when returns generated from the potential investment are higher than the market return. They usually avoid to invest in new start-up technological based business because there are no collateral available on which investors can pledge and grant relative funds.

Punch Tab seems to be an attractive early-stage investment because the company is considering to start an attractive business, which most of the industries are looking for. Industries are looking for exciting customer loyalty programs but they do not wish to invest heavily on marketing and development cost, so the potential opportunity provides them an opportunity to enhance and improve the loyalty program through an outsourcing program. Moreover, there is a clear possibility that industries will be getting more attractive towards this strategy; hence, investors will be more attractive.

Further, the entrepreneur has already a tremendous career in managing the people and largely owned business, which will be a plus point for investors because he has the related capabilities in managing the largely owned business along with leadership qualities and the technical expertise of the owner will contribute towards maximizing the worth of investors.

In order to facilitate expansion, every organization wants funds that will help them in growing. The organization requires funds at this stage to expand the data base and to adopt an effective marketing strategy, which will contribute towards achieving long term success of the organization.................

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PunchTab a Silicon Valley startup, founded in 2011, which has been developing Internet-key customer loyalty program for owners of websites, mobile application developers and brands. Founder / CEO Ranjith Kumaran must make strategic decisions about how to finance PunchTab early operations and growth with many options. Individual investors, angel, angel super funds, incubators and seed funds within traditional venture capital firms "Hide
by Ramana Nanda, William R. Kerr, Lauren Barley Source: HBS Premier Case Collection 20 pages. Publication Date: October 19, 2011. Prod. #: 812033-PDF-ENG

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