Case Study Analysis of Dr. Parviz-Tayebati Vision

This case study analyzes Dr. Parviz-Tayebati's vision for CoreTek, a company in the optical laser computing technology industry. It explores why VC firms were attracted to the company's significant government grants and the potential impact of alternative funding scenarios.

Running Head: CASE STUDY ANALYSIS OF DR. PARVIZ-TAYEBATI VISION
Case study analysis of Dr. Parviz-tayebati vision
Name of the Student
Name of the University
Author’s Note

1CASE STUDY ANALYSIS OF DR. PARVIZ-TAYEBATI VISION
1. Why did the VC firms like the fact that the company had received significant
government grants?
Company’s history of CoreTek:
It was in 1994, when the business firm Coretek was inaugurated by Dr. Parviz-Tayebati
as a vision to bring about innovation within the optical laser computing technology. It was Dr.
Parviz-Tayebati vision that he could bring about a change within the industry. It was inaugurated
in the era of 1998. It was in the era of 1998, CoreTek received more than $5.5 million in SBIR
grants, nine phase I awards, and five phase II awards. It was in the era of 1999, CoreTek raised
$6 million in an “A” round of preferred stock from a syndicate of three VC firms, led by Adams
Capital Management, valuing the company at $11.5 million prior to the investment.
Company’s history of Adam’s venture Firm:
Adams Capital Management, Inc. (ACM) business firm is a Pittsburgh-based venture
capital firm specializing in early-stage applied technology investments. It was inaugurated in the
early phase of 1994, ACM is a lead Series. An investor and has raised an amount of about $815
million since inception.
Its CEO is Jeff Mullen, his visionary statement comprises of “After receiving many top
VC deals, we chose ACM because of its perspective on goal alignment and its strong
commitment towards the success of the management team. Joel-Adam’s mentorship is directly
responsible for much of the dynamics success as a company and mu success as being a CEO.
ACM has redefined the concept of the value-add”. ACM's portfolio companies are led by
innovative technology entrepreneurial bodies and experienced as well as professional
management teams who are defining and dominating product categories. ACM leverages its
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2CASE STUDY ANALYSIS OF DR. PARVIZ-TAYEBATI VISION
collective operations and industry expertise in the information technology and networking
infrastructure industries to help the portfolio companies commercialize their technology vision
into self-sustaining, market-leading, companies. Some other facts about the venture firm ACM is
as follows:
• Venture capital firm founded in 1994 to invest in early-stage applied technology companies.
• Experienced lead Series A investor noted for its disciplined market analysis and
business/technology fundamentals.
• $815 million of capital raised since inception.
• Pittsburgh-based firm that provides direct access to best deals within our area of expertise.
• Industry expertise: Information Technology and Networking Infrastructure.
• Our success as a venture capital firm is due in equal parts to the belief of our investors, the
promise of our portfolio companies and the experience of our team.
• Joel P. Adams addressed as the general partner, Jennifer E. Parulo addressed as the CFO,
Venture Capital. Matthew J. Kline addressed as the Senior Financial Analyst, and Andrea S.
Adams addressed as the Treasurer.
• Current portfolio companies of the business firm for Information Technology are Dynamics,
First Insight, RoadRunner Recycling Inc., SnapRetail, and The Efficiency Network Inc. (TEN).
Current portfolio companies of the business firm for Networking Infrastructure are Uplogix,
VBrick Systems. Current portfolio of featured exits are Airnet Communications, AutoESL
Design, Technologies, Bluestone Software, CoManage, Context Media, CoreTek, Cytyc,
DATAllegro, Dell, Factory Logic, Flashline, InSoft, Innovative Solutions & Support, Intrinsity,
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3CASE STUDY ANALYSIS OF DR. PARVIZ-TAYEBATI VISION
Landslide Technologies, LibreDigital, Luminescent , echnologies, Mirage Networks, NetSolve,
ON Technology, Optellios, Qspeed Semiconductor, ReturnCentral, Revenue Technologies,
SmartOps, Touchdown Technologies, Works.
The VCs were attracted by the fact that the company was in a hot field and was able to
secure significant amounts of government funding. It was in the era of the June 2001, that the
business firm Coretek was acquired by the Nortel’s business firm. Nortel’s possessed Coretek
business firm by means of the publicly traded stock. However, Dr. Parviz-Tayebati still possess
30 percent of the CoreTek Company’s share.
It was in the era of in 1999, CoreTek raised $6 million in an “A” round of preferred stock
from a syndicate of three VC firms, led by Adams Capital Management (www.acm.com),
valuing the company at $11.5 million prior to the investment. The VCs were attracted by the fact
that the company was in a hot field and was able to secure significant amounts of government
funding.
The concerning business firm has a huge potential to introduce change in the laser computing
technology The business firm has successfully formulated positive brand equity. Dr. Parviz-
Tayebati was successful in creating a image of the business firm image not only within the
market but in the eye of the investors, VC firms, and primary of the government body. It has a
financial support from the government body and financial offering from the VC body. Dr.
Parviz-Tayebati projects concerning the research has support by means of SBIR programs, this in
fat has resulted in formulation of goodwill in the eye of the market. Dr. Parviz-Tayebati research
was important as it will reduce the manufacturing and inventory costs for the source lasers, and it
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4CASE STUDY ANALYSIS OF DR. PARVIZ-TAYEBATI VISION
provided an essential element of the wavelength‐managed network, which promised to reduce
costs by dramatically increasing network use and efficiency.
Company’s mission:
The aim of the concerning business firm is to bring about innovation in the laser
computing field with the intention to introduce cut in the inventory cost and manufacturing cost
of the laser resources. The objective of the business firm is to penetrate the present market and
occupy a major share of the market.
Company’s growth:
It was the believe of the Dr. Parviz-Tayebati that there is an immense need to bring about
a change within the optical laser computing industry in order to reduce the cost in two distinct
was such as the it reduced manufacturing and inventory costs for the source lasers, and it
provided an essential element of the wavelength‐managed network, which promised to reduce
costs by dramatically increasing network use and efficiency. The innovation in the field of the
laser computing has no been carried out previously by any of the present business firm those are
in the field of the laser computing technology.
It was the funding activity from the side of the government body which attracted the
interest of the VC firm. They evaluated the current situation and believe that the government for
another time period is going to fund the business firm surely, and with the help of the
government funds the firm is able to accomplish its objectives.
However, it was the belief of the venture capital (VC) bodies that this firm has been able
to capture the interest of the government funding which is a signal toward the fact that this firm
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5CASE STUDY ANALYSIS OF DR. PARVIZ-TAYEBATI VISION
has a lot of potential. They understood that the support of the government will help the vision of
Dr. Parviz-Tayebati to step forward. They believe that the government upon having a proper
evaluation has arrived at a position to initiate funding for the CoreTek firm. Moreover,
innovation in such research will not only benefit Dr. Parviz-Tayebati, but will also benefit the
corporate business sector dealing with such technology.
Therefore taking consideration the past of Dr. Parviz-Tayebati it seems like he is a
qualitative research person and is dedicated towards his vision. Speaking about Dr. Parviz-
Tayebati he received a BSc with first‐class honors from the University of Birmingham, England,
in 1982, followed by a master ’ s degree from the University of Cambridge in theoretical physics
and a PhD in quantum electronics from the University of Southern California in 1989.
At the age of 31, 31 aged Parviz then joined Foster‐Miller Inc., near Boston, a small firm
that in the past had derived much of its revenues by undertaking government‐funded research
using the SBIR Programs Foster‐Miller Inc., near Boston, a small firm that in the past had
derived much of its revenues by undertaking government‐funded research using the SBIR
Programs. However undertaking research activities in optical computing technology, Dr. Parviz-
Tayebati learned much about the process for winning, technology development awards from the
federal government. It was the believe of the VC firms that Dr. Parviz-Tayebati has the ability to
bring about an innovation within the optical computing technology, they evolved a faith upon Dr.
Parviz-Tayebati.
Moreover a number of government‐funded research using the SBIR Programs. The
government does not imply undertake measure to fund the objectives of any business firm and
that to of startup nature. It was the faith of the government that Dr. Parviz-Tayebati is capable of
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6CASE STUDY ANALYSIS OF DR. PARVIZ-TAYEBATI VISION
introducing innovation. Winning the faith and trust of the government authority. The business
firm captured the interest of the VC firms. Between founding the company and 1998, CoreTek
received more than $5.5 million in SBIR grants, nine phase I awards, and five phase II awards.
The market lack the innovation in terms of the laser computing. No other rival firm has
ever planned to introduce such technology. Other firm who may be possessing such innovative
technology will be dominant market for another couple of years as this will take time for other
firms to introduce new innovation that might outdate the laser computing technology as
introduced by the vision of Dr. Parviz-Tayebati. They have a deep knowledge of the telecom
industry working the trends that is required to take the business to the next level.
Besides, it was the believe of the VC firm that the present market share would change in terms of
the stock market if the innovation idea of Dr. Parviz-Tayebati will be successful. The VC firm
who might be possessing share of the company CoreTek will incur a huge profit and may be
stable in the stock market for another couple of years. There lies a huge opportunity for the
CoreTek business firm to capture major proportion of the public interest to invest in the share of
the CoreTek Company.
2. Assume that this had not happened and that all the funding for the company had come
from VCs. Add an earlier seed round to replace the government funds, and make an
estimate of the dilution that Parviz and the founders would have had to take in this case if
the VCs were to retain their IRR.
Dr. Parviz-Tayebati chose this investor group not only on the attractive deal that he was
offered but by witnessing the speed with which they could make decisions and their deep
knowledge of the telecommunications industry. In fact, in fact, another group of VCs offered a
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7CASE STUDY ANALYSIS OF DR. PARVIZ-TAYEBATI VISION
higher valuation. Dr. Parviz-Tayebati and his team were now working for a time period of about
24/7. The development proceeded rapidly, as CoreTek built its first manufacturing line. But the
money was still not enough, and only nine months later, the company closed on a “B” round of
$20.5 million at a premoney valuation of more than $52.5 million from an extended syndicate of
four VC firms.
SWOT analysis of the company:
STRENGTH
- The business firm has a huge potential
to introduce innovation within the
laser computing technology.
- The business firm has successfully
formulated positive brand equity.
- Dr. Parviz-Tayebati was able to
formulate a positive and well
renowned image not only within the
market but in the eye of the investors,
VC firms, and primary of the
government body.
- It has a financial support from the
government body and financial
offering from the VC body.
- Dr. Parviz-Tayebati projects
concerning the research has support by
means of SBIR programs, this in fat
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8CASE STUDY ANALYSIS OF DR. PARVIZ-TAYEBATI VISION
has resulted in formulation of
goodwill in the eye of the market.
- Dr. Parviz-Tayebati research wa
important as it will reduce the
manufacturing and inventory costs for
the source lasers, and it provided an
essential element of the wavelength‐
managed network, which promised to
reduce costs by dramatically
increasing network use and efficiency.
WEAKNESS
- Dr. Parviz-Tayebati research and
development in the field of laser
computing is still at a prototype phase
which means that still there a lot of
dedication and efforts is required.
-
OPPURTUNITIES
- It has the potential to beat the rival
firms as such technology does not
exists in the hand of the rival business
firm.
- A number of telecom industry has
shown their interest towards the
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9CASE STUDY ANALYSIS OF DR. PARVIZ-TAYEBATI VISION
CoreTek business firm.
- There is a number of funding from the
government side which has captured
the interest of the VC bodies.
THREATS
- Elimination of government help in the
form of funding by SBIR programs
will hugely cause the research of Dr.
Parviz-Tayebati.
- The number of rival firms that exists,
innovation in their field of technology
may outdate the vision of the Dr.
Parviz-Tayebati vision.
- The change in the current government
regulations and policy will impact Dr.
Parviz-Tayebati vision.
- The fluctuation in the current
economic policy will adversely affect
the business firm CoreTek.
Taking into consideration the SWOT analysis of the business firm, it seems like the business
firm has huge growth potential as such that by making use of the VC firm the firm can continue
its research and development in the field of the laser computing.
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10CASE STUDY ANALYSIS OF DR. PARVIZ-TAYEBATI VISION
In case if the investment opportunity were not favorable from the side of the government
as well as form the side of the VC firm. In order to pay the return to the VC unit, the business
firm has to sell their entire asset along with the research that were continued till present point of
time. It is the corporate ethics that introduces the sole responsibility and an ethical code of
conduct that is mandatory to be followed by each of the individual business unit in order to align
the activities of the business unit in an ethical manner.
Hence, taking into consideration the ethics and CSR responsibility, the business firm
undertaking research and development for which the fund has been incurred form the VC unit is
liable to pay them their return. It is their liability that is required to be fullfilled. However, in
case the business firm is not able to meet the liability, the business firm may arrive at a situation
to take loam from the financial bodies for fullfilling the liability. However, the loan will only be
provided upon the evaluation of the firm’s potential to repay the loan. Since, the entire funding
of the project has been carried out by the VC unit as proposed in the question scenario. There lies
a right for the VC body to claim for its cost that is incurred in supporting the research and
development activity.
Moreover, before initiating the funding process by the VC firms, a proper formal
agreement has been introduced where both the party is to be satisfied in regard to the terms and
conditions. This agreement is valid in the eye of the law. The agreement clearly states out that
the party will be liable if it fails to comply with the terms and conditions.
In fact, if there was the absence of the government funding much of the attention and
goodwill that stays in the hand of the CoreTek business firm would have been fail to exist in the
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11CASE STUDY ANALYSIS OF DR. PARVIZ-TAYEBATI VISION
eye of the market. Moreover, the VC unit has been focused on the CoreTek business firm
because of the SBIR programs that has been introduced by the government fundings.
3. Approximately how much less would the founders have in their pockets when the
company was sold?
After the nine months of the round A, the company closed on a “B” round of $20.5
million at a premoney valuation of more than $52.5 million from an extended syndicate of four
VC firms. The firm would have been left with an amount of $20.5 million left in the pocket.
However a number of higher investment opportunity has been received by the CoreTek firm but
the firm wants the investment to be quick and supportive enough for which the CoreTek firm for
which the firm choose to select the investment opportunity of dam’s VC firm.
However, after the company was being sold still a majority of about 30% stays in the
hand of the Dr. Parviz-Tayebati.
In 1998, CoreTek received more than $5.5 million in SBIR grants, nine phase I awards,
and five phase II awards. It was in the era of 1999, CoreTek raised $6 million in an “A” round of
preferred stock from a syndicate of three VC firms, led by Adams Capital Management
(www.acm.com), valuing the company at $11.5 million prior to the investment.
However, it was in June 2001, 2001 Nortel Networks purchased CoreTek for $1.35
billion paid in Nortel’ s publicly traded stock. Parviz joined Nortel as vice president of business
development. At that time, Parviz and the other insiders of the company still owned
approximately 30 percent of the company.
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12CASE STUDY ANALYSIS OF DR. PARVIZ-TAYEBATI VISION
Whereas ethics play a very important role within the business it outlays the functional
manner in which the activities of the business should be carried on. It is the set of ethics that
governs the business along with the individual employees.
Therefore taking consideration the past of Dr. Parviz-Tayebati it seems like he is a qualitative
research person and is dedicated towards his vision. Speaking about Dr. Parviz-Tayebati he
received a BSc with first‐class honors from the University of Birmingham, England, in 1982,
followed by a master ’ s degree from the University of Cambridge in theoretical physics and a
PhD in quantum electronics from the University of Southern California in 1989.
At the age of 31, Parviz then joined Foster‐Miller Inc., near Boston, a small firm that in
the past had derived much of its revenues by undertaking government‐funded research using the
SBIR Programs Foster‐Miller Inc., near Boston, a small firm that in the past had derived much of
its revenues by undertaking government‐funded research using the SBIR Programs. However
undertaking research activities in optical computing technology, Dr. Parviz-Tayebati learned
much about the process for winning, technology development awards from the federal
government. It was the believe of the VC firms that Dr. Parviz-Tayebati has the ability to bring
about an innovation within the optical computing technology, they evolved a faith upon Dr.
Parviz-Tayebati.
Moreover a number of government‐funded research using the SBIR Programs. The
government does not imply undertake measure to fund the objectives of any business firm and
that to of startup nature. It was the faith of the government that Dr. Parviz-Tayebati is capable of
introducing innovation. Winning the faith and trust of the government authority. The business
Page 12 of 18

13CASE STUDY ANALYSIS OF DR. PARVIZ-TAYEBATI VISION
firm captured the interest of the VC firms. Between founding the company and 1998, CoreTek
received more than $5.5 million in SBIR grants, nine phase I awards, and five phase II awards.
The market need innovation technology in terms of the laser computing. Any other
business firm has not yet been able to bring change in the field of the laser computing
technology. No other rival firm has ever planned to introduce such technology. Other firm who
may be possessing such innovative technology will be dominant market for another couple of
years as this will take time for other firms to introduce new innovation that might outdate the
laser computing technology as introduced by the vision of Dr. Parviz-Tayebati. They have a deep
knowledge of the telecom industry working the trends that is required to take the business to the
next level.
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14CASE STUDY ANALYSIS OF DR. PARVIZ-TAYEBATI VISION
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