Punch Tab’s Investment Opportunity: Business Model and Financing

This case study delves into Punch Tab's investment opportunity, highlighting its freemium business model and the potential for attracting investors. Co-founders Ranjith Kumaran and Mehdi Ait Oufkir aimed to create a customer loyalty program that rewarded users, differentiating it from competitors. The analysis identifies the freemium model as a key element, offering free services to users while establishing long-term relationships. Concerns about the execution costs and securing the right talent are addressed, alongside the attractiveness of the opportunity due to the potential for online marketing and web presence adverts. The study suggests that seed round financing would be beneficial, attracting both short-term angel investors and long-term venture capitalists. Ultimately, the success of Punch Tab relies on strategic partnerships and effective execution of its innovative business model. Desklib offers a platform for students to access similar case studies and solved assignments.

Running head: PUNCH TAB 1
Punch Tab’s Investment Opportunity
Student’s Name
Institutional Affiliation

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Punch Tab’s Investment Opportunity
Introduction
Ranjith Kumaran and Mehdi Ait Oufkir were the co-founders of a multimillion startup,
Punch Tab, based in California by February 2011. Both men decided to create something that
was better than their previous project. Punch Tab, a successful organization resulted from a
consultation from expert companies about their marketing strategies and how they handled their
customers online. What a huge success for Kumaran and his colleague to tap into.
Business Model and Associated Concerns
From the description of Punch Tab’s business model, the most probable business model
was the Freemium Model (Teece, 2010). This is because, the services that were offered by Punch
Tab to the customers were majorly online and at no cost at all. A long term relationship between
the receivers of the service and the givers of the service would be established in the long run.
Majorly, the entrepreneurs of this grand empire had their own potential concerns about
the business model. The plans were laid out but the execution of it would cost more than it
required. Mr. Kumaran had his doubts on the matter and wanted to make plain the requirements
of the project that he thought was not possible to acquire (Giesen, 2007). He was worried about
getting the right people to entrust with the project but that would cost him a minimum of
$500,000. It was also long before the commencement of the work since he wanted almost 9
months to carry out some experiments and fail before the actual work.
Why is it an attractive opportunity?
From the free services offered by Punch Tab, their partners are likely to be organizations
doing online marketing as well as web presence adverts. This is because it attracts investment
opportunities that have an interest in expanding the business from the traffic directed to their

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website. People of all nationality will come to build it from scratch, because of the operations of
its operations. Punch Tab aims at making a customer loyalty program that rewards points instead
of taking from the users. Eventually, the potential users of the program will have an opportunity
to design their own created interface.
Advantages of seed round of financing
According to the company’s description, it is evident that a seed round of financing
would be great for Punch Tab. The investors would want an exchange for a stake in the company
but it would not be a loss, rather a profit (Hadjikhani & Thilenius, 2005). Seed funding can be a
huge contributor to the organization as long as investors who can push through with the highs
and lows of the method are found.
Short-term and long-term partners
The investors for the short term aspect are the angel investors known for using their own
money as capital to start another business and finance the project at the initial stages. The short-
term aspect is for this type of investors since they stand for it (Hallen & Eisenhardt, 2012).
Furthermore, Punch Tab did not have a strong connection with angel investors and needed some
time to work on it. In the long term, the Venture Capitalists are the best partners for the venture
because they can afford losing interest at the beginning of the project when a project does not
succeed.
Conclusion
The featured organization's efforts to rise in the business field should be due to the
people's efforts as illustrated. Punch Tab’s free available services are well appreciated under the
Freemium business model which attracts a lot of investment opportunities. With this kind of
approach, only the right investors are required to help using a seed round of financing, a method

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that can add a lot of capital to the business since it is just starting. In summary, the angel
investors need to partner with Punch Tab for the short term aspect and for the long term aspect,
the Venture Capitalists should be just good partners.

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References
Giesen, E., Berman, S. J., Bell, R., & Blitz, A. (2007). Three ways to successfully innovate your
business model. Strategy & leadership, 35(6), 27-33.
Hadjikhani, A., & Thilenius, P. (2005). Non-business actors in a business network: A
comparative case on firms actions in developing and developed countries. Elsevier,
Amsterdam, New York etc.
Hallen, B. L., & Eisenhardt, K. M. (2012). Catalyzing strategies and efficient tie formation: How
entrepreneurial firms obtain investment ties. Academy of Management Journal, 55(1), 35-
70.
Teece, D. J. (2010). Business models, business strategy and innovation. Long range
planning, 43(2-3), 172-194.