Gene One - Not Going Public but Seeking Alternative Investors - Essay Example

However, going public includes a series of challenges, such as: high costs for developing the relevant process, meaning especially ‘the legal fees’ (Marcus and Wallace 1997, p.275), the ‘high costs for maintaining the public company status’ (Lipman 2005, p.179) and the continuous monitoring of all the firm’s important transactions (Marks et al. 2009, p.308). For the above reason, before going public, a firm should try to identify alternative sources of funding. Gene One should also use this practice.

The firm’s performance up to now has been significant, if taking into consideration its rather short presence in the market. It would be preferable for the organization to avoid the exposure to the risks and challenges of going public and seek for additional funds through an alternative source of funding. As noted in the case study, the firm needs to secure its source of funding within a particular deadline, i.e. within the next three years (case study, p.1). Three are the key organizational sectors that would have increased funding needs within this period: new development, advertisement and marketing.

Three will be the criteria used for deciding the alternative source of funding available to the organization for covering its financing needs: the firm’s current financial status, the level of annual growth that the organization has to achieve within the next 3 years, and the potentials of the alternative source of funding to support the growth of the firm in the long term. The funding by a Peer-to-Peer network is considered as an appropriate solution, following the following advantages: a) the firm can borrow a high amount of money without using its assets for backing the loan given; b) the firm can choose the lender that offers the best terms in regard to the particular transaction; in other words, the firm can choose a loan the terms of which are more favorable for the organization, compared to the terms of loans offered by other lenders; in this way, the firm could secure the level of funds necessary for improving its new development, marketing and advertising sectors so that an annual growth of 40% is achieved; c) the particular process can be managed and monitored by an intermediate, i.e. a firm specializing in this field, such as the firm Prosper.

In this way, the risks involved are minimized; d) the firm would not have to meet the strict requirements, such as the requirements that a firm would have to meet if it decides to go public; Gene One is not prepared to meet such requirements, as noted by Michelle in Slide 8 of the case study; e) the completion of the process does not require the legal binding of the members of the organization; in case that any mistake takes place in applying for the loan, the members of the organization cannot be held responsible, an issue that has caused the concerns of the executives in Gene One (Slide 8 of the case study); f) the firm could use the same process for gathering additional funds, if necessary, without following complex processes; in this way, the firm could be able to meet not only its current funding needs but also any emergent future funding needs, and g) the above process could be completed quite quickly.

In 2005 the firm announced the development of a new research project that would highly enhanced the firm’