ZSX Medical, LLC Case Analysis: Should Ann Invest?

The paper covers case analysis of Ann who is an angel investor and considering investing in ZSX Company, which have experienced a high growth and better exit strategies of three to five years (Zimmerman 2018 p.3). Therefore, the paper seeks to find out whether Ann should invest in the company or she will continue with her investment in angel investors.

ZSX medical, LCC has experience and expert staff who are competent in their operation. Furthermore, the CEO who is also the founder of the company has fifteen years of experience in the medical device industry. The strong financial position of the company is effective with increased in revenues of 662 percent which accounts for $1.14million and decrease in expenses of 31 percent despite the slight fluctuations experienced in 2017 (Zimmerman 2017 p.980).The competence of management team is another strength with Dr. Mazzucco and Eric Rugart having desired experience in operating the organization indicating that they have good analytical skills of problem-solving and encountering all types challenges that may interfere with investors of the organization. The competence of management shows that a company is reliable and convenient for investment (Cheng, Lin, Hsiao and Lin 2010 p.433)The exit strategy used by ZSX Medical, LCC Company is another strength that shows the organization has experienced high growth and exit could only occur after three years. Furthermore, ZSX valuation at exit was $50 and $250 million is always attractive as compared to competitors that take three to seven and an exit of $50 (Zimmerman 2017 p. 980).
One of the major weakness of the company is the lack of FDA approval for the Zip-Stitch system, which scares the potential investors about the reality of the company although the process takes longer and it is costly for approval taking an estimated period of 7 months and costing approximately $1.7 million. This results to potential investors in the company being scared of investing high in the company despite leaders having a “skin of game”.
According to Ghodeswar (2008 p.4) target customers are people likely to consume the products. ZSX medical, LCC Company has its customer spilled into three segments since it can be expensive to create packages for more groups. Segment 1 consist of retirees both men and women as they are likely to invest for their old age life. Segment 2 consist of families from middle-class as they are interested to invest for job security and segment three consist of young adults as they are eager to invest early for their future. From the three segments, people from segment 2 are favored by the nature of product, as they are high consumers of product and are financially stable for large amount of investment. In terms of gender, women from segment 2 are mostly exposed to surgical procedures and incur high health cost. Therefore, people who are most responsive to products and main target of ZSX medical are Women health,
Return on investment (ROI) is one of the determinants that will result to success or failure of the business. According to Romero (2011 p.145) return on investment is ration that exists between the cost of investment and profit from investment from companies. For example, if ZSX, LLC Company has a high and fast return on investment, the company will attract many potential investors. On the other side, if VC Company has a low return on investment, the company will have limited investors and the market share will diminish at a given time. This may lead to the closure of the company.According to Marston, Li, Bandyopadhyay, Zhang and Ghalsasi (2011 p.176) a successful business must have to be in touch with the latest technology in order to survive rapid competition experienced within its operation. Furthermore most of the investors before investing their money they consider the security and technologies used by the financial institution. If an organization uses outdated technology, it will have a high probability of failing to meet customer satisfaction and rapid competition. For example, ZSX medical, LCC has an investment of thirty-one percent in technology and that is why it has a strong market share.

The entrepreneur has minimized risk by opting not to invest in large amounts. Therefore, if the business fails to meet its goal she will incur fewer losses as compared to when she invested with a large amount. Furthermore, she has done vivid research about the company financial position to learn whether there is a financial loophole within the organization. The entrepreneur also sought consultation from other sources to get first-hand information from other parties who have reliable information about the reliability and validity of the organization.
The entrepreneur could do better by first not investing directly but rather taking time to do observation about the progress of the company. If the progress of the company is running well over a long period then she should invest but if after some time the company results to some issues she should run away. According to Clark (2008 p.257) a good entrepreneur always takes caution before investing.
According to Swan (2009 p.124) “Skin the game “in finance is a situation where top management personnel uses their own money to invest in the company by buying stocks in the same company they are running. Ann liked the skin game in the company as the large sum of money invested in the bank assured her of her investment security. Furthermore, the skin of game was a one way of determining the strength of finances of the company and showing the capabilities of organization it will run effectively for many years.
Terms of the deal are a condition that each part should agree before starting doing business. (Sweidan & Widner 2008 p.45).The first term states that Entrepreneur must review due intelligence report appropriately looking at the financial statement and company profile to determine the financial position of the company before starting investing and to learn about which strategy will have a high return on investment. The second term was that the exit period should not be three to five years with each period having stages. The overall stages were ten.
Ann should invest in the ZSX medical since the company has competent and experienced personnel who will assist her to further her entrepreneurship dreams. Furthermore, through investing with company Ann will have a short time frame of an acquisition, as the financial position of ZSX medical is strong hence the company having the possibility of long-term survival. Despite, the risks associated with the company, Ann should invest large amount in the company. If Ann starts an investment with the company, she will be in a position to attain her diversifying goal of investing $50,000 in one year. If she exited the company after a period of three years at 2x she would invest $100,000 and at 3x then she will close her financial books with $150,000 which is a good opportunity. According to Nybakk & Hansen (2008 p.473) the most successful people in the world are risk takers and therefore Ann should take the opportunity and invest.

Conclusion

The best way to invest in an organization is by considering the opportunities and benefits the company offers. Experienced managers’ mentor Ann investment in the company and therefore Ann develops effective entrepreneurship skill. Therefore, Ann investment in the organization offers her the best opportunity to attain her short time acquisition rates.

References

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Monica Zimmerman PhD, C.P.A., 2017. A New Angel’s Investment Decision: What Does She Consider?. In United States Association for Small Business and Entrepreneurship. Conference Proceedings (p. 980). United States Association for Small Business and Entrepreneurship. U.S.A : Sage publishing

Nybakk, E. and Hansen, E., 2008. Entrepreneurial attitude, innovation and performance among Norwegian nature-based tourism enterprises. Forest Policy and Economics, 10(7-8), pp.473-479. U.S.A: Elsevier

Swan, P.L., 2009. The political economy of the subprime crisis: Why subprime was so attractive to its creators. European Journal of Political Economy, 25(1), pp.124-132.

Sweidan, O.D. and Widner, B., 2008. Transparency and central bank losses in developing countries. Research in Economics, 62(1), pp.45-54.U.S.A: Elsevier