Electric bike startup

Dion is an engineer with Tesla Motors who helps to design electric motors. It has always been his dream to start his own business, but as he has gotten older, he has not gotten around to it. He is also an avid cyclist who rides near his home in Palo Alto, California. It is hilly terrain and as he has gotten older, he has found it more difficult to navigate the steep terrain.

He has thought about buying an electric bike that would give him an additional boost with an electric motor. However, he has not been satisfied with any of the many brands of electric bikes he can find. The ones that work well are astronomically expensive and the less expensive models are poorly constructed and have short battery life.

One day at Tesla headquarters, Dion is having lunch with three of his colleagues when he raises his frustration with his inability to find the right electric bike. The other three are also avid cyclists, so they launch into an intense discussion. Mark, who works in Tesla’s marketing department, thinks that there is a demand for a high-quality electric bike at a reasonable cost. “There are social trends that could drive that demand,” he says. “First, commuting by bicycle is becoming more popular, and many who are new to it need that extra assistance to make it a comfortable experience. Also, as the population ages, older cyclists are looking for ways to keep cycling as much as they did when they were younger. An electric bike could help them do that.”

Dion responds that some of the new electric motor technologies he has been working on could be repurposed to create a high-quality electric bike at a reasonable cost. “I have been experimenting with some designs, and I think it is workable.” Rosalinda, who manages production of the Tesla Model S interjects, “You know, I came across a defunct bicycle factory about 20 miles north of here when we were looking at potential sites for expansion. It would be perfect to manufacture the bike you are describing.”

Dion can’t hold back any longer and blurts out, “Let’s start our own bicycle company and make this bike!” Sandra, who works in the finance department, scrunches up her face and says, “Whoa there, partner. Where is the money for this venture going to come from? While our salaries and stock options have made us comfortable, we don’t have the resources to manufacture and market this bike.”

The group agrees that they would love to start a new company, but they must figure out how to solve the finance problem that Sandra pointed out in order to do so. Later that day, Dion can’t get the idea out of his mind. Then, a potential solution comes to him. He remembers Brenda Zhang, who rode with one of his cycling groups, Palo Altitude. She is a partner in a large venture capital firm that invests in promising start-ups. Dion isn’t sure if she even remembers him, and she only knew him as a cyclist, not an engineer. But he thinks it’s worth a try.

He sends the following email:

To: Brenda Zhang
From: Dion Morris
Re: Electric Bicycle Start-Up

Several of my colleagues at Tesla and I have come up with a new design for an electric bicycle that would be relatively inexpensive, very efficient, as well as durable. I know this is coming out of the blue, but I am hoping you will remember me from our rides with the Palo Altitude group. We are looking for start-up funding, and I thought a fellow cyclist like you would see the potential market for a high-quality, inexpensive electric bicycle. Please let me know what you think.

Later that day, he is surprised to find the following email in his inbox:

To: Dion Morris
From: Brenda Zhang
Re: Electric Bicycle Start-Up

Of course, I remember you, Dion. You were always at the head of the pack in our rides. I am intrigued by your idea and would like to set-up a meeting to discuss it. I need to start doing my homework on the venture to see whether I and my partners are willing to provide funding. In preparation for our meeting, I would like you to prepare a memo that addresses the following issues:

Why do you think you can create a successful start-up? What traits will you need to be an entrepreneur?
What kind of leadership style would you use, and why?
Describe your product and why you think there is a market for it.
What legal form do you think best suits your start-up and why?
What kind of financial document should you provide so that I can evaluate the viability of your start-up?
What are the characteristics of your target market?
Explain specific types of marketing the business should pursue.
What other sources of funding might be available for you, whether or not we invest in your start-up?
How would you organize your management team, and who in your group would lead each function in the organization?
What brand name do you propose for your electric bike, and why did you choose it?
Please send this to me by next week, at least a day before our meeting. I look forward to our discussion.

You are a good friend of Dion’s. He respec