Zipcar Robin Chase Has Just Essay

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The company has only just entered the Boston market and has not developed other markets, but is the first-mover in North America. Strategically, ZipCar could benefit significantly from rolling out into other cities before other competition emerges.

It is believed that in another six months, more financing will be required to facilitate further expansion. Filling in the Boston market is expected to utilize all of the $1 million remaining after the debt is paid off. Venture capitalists are believed to want to see a couple of things from ZipCar in order to make the successive financing rounds smoother. The first is that the company will need to demonstrate that the current leadership team is capable of leading this growth. At present, there is concern that the team's lack of experience is going to inhibit its ability to grow. However, when professional management was brought in before, it was not successful. The other thing the venture capitalists are going to want to see in the future is that that company has built a critical mass in Boston. This will help create strong network effects for the company that will facilitate further investments from the venture capital community. Strategically, however, this may mean forgoing first mover advantage in other cities. However, moving into other cities before having the capital required to do so is not recommended, so the focus for Robin at this point has to be to earn additional capital by demonstrating the concept's success in the Boston market.

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In terms of financials, the company is projecting net income of $200,800 for the Boston market, based on 36 cars, serving 648 members (market penetration of 4.32%). The cost of rolling out to four more cities in the coming year is $1.6 million, but the rollout is expected to be profitable in its second year. In year five, the company is expected to enjoy revenue of $1.227 million and net income of $459,000 on that total. A reasonable exit value in five years would be revenue of $111 million. The growth of the company is expected to be self-sustaining within a year of the national rollout, as projections show that each new city is likely to be profitable within a year of launch, based on the Boston experience.

Given the recommendation for a round of financing and four city rollout in six months, followed by a further round in a year that will constitute a nationwide rollout, the company will need progressively large sums of money. The cost of a four-city rollout is going to be $400,000 per city, plus the expected operating loss of $615,000. Thus, the next round of financing should be for $2.2 million. The round subsequent to that would add another ten cities. At $400,000 per city, and with expected operating losses in the first year of the rollout, the total funding that would need to be raised during that round would be $5.54 million,.....

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