Space Data Case Term Paper

Pages: 5 (1342 words)  ·  Style: Chicago  ·  Bibliography Sources: ≈ 2  ·  File: .docx  ·  Topic: Business

Space Data: A business strategy out of control?

The nature of entrepreneurial management

Space Data founders Eric Frische and Jerry Knoblach offered the advantages of two complementary yet contrasting methods of entrepreneurial management. Both were friends and roommates at MIT, technological 'geeks' interested in the economic potential of new communications. However, Frische was excited by hands-on customized technology, while Knoblach was more excited by the prospect of offering technology to a wide range of people (MacCormack 2002:2). The initial business model and services offered by the Space Data Corporation seemed to combine their respective strengths of thinking big but deploying the potential of small and relatively inexpensive and customized technology.

Recognizing and defining an opportunity

To these executives of the new Space Data Corporation, the fact that 20% of the United States did not have access to the full benefits of wireless communication systems, such as paging or voice technology, was a business opportunity ripe for the taking (MacCormack 2002:2).

Formulating a business concept

The friends' concept was to provide "fill-in" coverage to wireless service providers, by using cellular towers known as SkySites in the form of disposable weather balloons that were launched by the National Weather Service. By suspending Space Data's hardware for sending and receiving signals on the balloons, total national coverage could be achieved (MacCormack 2002:1).

Product line strategy

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The initial focus was on services not currently available to such rural populations, including paging and wireless voice technology.

Economic model of the business

The model was a service-based model determined to exploit the cheap, inexpensive yet wide-ranging potential of SkySites weather balloon technology. Two launches a day everyday would cost $220,000 per year to run and the initial communications payload for the two-way paging technology was supposed to cost only $300 (MacCormack 2002:6).

Estimating market potential

TOPIC: Term Paper on Space Data Case Assignment

Jerry rationalized that as 80% of the U.S. population was served with wireless coverage from towers located in 10% of America, mostly in and around urban areas this left more than 50 million Americans in areas where tower-based wireless services do not work (MacCormack 2002:3). The demand and rationale for the company seemed secure provided the balloons did not fall afoul of government regulation and the government use of such weather balloons (MacCormack 2002:5).

Buyer behavior and market segmentation

The initial business plan outlined three primary markets: paging and messaging for customers outside current reception areas and paging and messaging for people living in rural communities, with possible expansion into the emerging telemetry market later on (MacCormack 2002:6).

The concepts of objective, strategies and tactics/types of strategy

The balloons had to be efficient yet inexpensive and effective, so Eric and Jerry devoted all the resources at their disposal to perfecting the design, eventually accepting a greater financial outlay in the hopes of securing inexpensive operating costs.

Resource strategies and leveraging

One of the greatest resource challenges was acquiring a frequency spectrum. To capitalize upon a unique resource strategy and to leverage new capital, Jerry's father "created a holding company in cooperation with Space Data, set up solely to bid for the spectrum -Jerry's father contributed the money, and in return, this company would receive leasing fees from Space Data until his contribution had been repaid (MacCormack 2002: 10)

Finding money and raising capital

Jerry first drew upon family capital, $500,000 total from family members. Board members were sought for their engineering and legal expertise to deal with government regulations regarding the technology, as well as familial loyalty and belief in the project concept, which cold keep legal and employee costs down. Overtures were made to Motorola, the international communications company that was enthused by the concept (MacCormack 2002:7). The company continued to draw upon familial as well as corporate capital as the design was perspective, initiating "its first formal private placement of equity in November 2000, raising $1.5 million at a post-money valuation of just over $10 million, largely from Jerry's father and brother, but also with wide participation from employees, directors and advisors' (MacCormack 2002:10).

Pro forma financial statements

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